Buying Commercial Property: The Industrial Sector

Industrial property has always been seen as a safe bet for potential buyers and investors.

Industrial property centres on standard industrial estates, warehouses, factories and any other logistics facilities. Smaller properties are often known as 'flex' or 'R&D' sites, whilst you can also opt for larger 'big box' properties. 

Note that there is a distinct difference between factories and warehouses. Whilst factories contain machinery for manufacturing and processing, warehouses prioritise storage.

What should I be looking for?

When looking to buy industrial property, there are certain factors to consider:

How are the docks situated in the property? At Grade Level, the parking space and warehouse floor will be on the same level, whilst semi-dock and full-dock heights stand at 24 and 28 inches respectively.

What features do you need to suit your business? Considerations include size, ceiling height and how far apart the internal pillars need to be so you can carry out your daily business.

Do you have enough space in case of future surplus storage?

What supplies and equipment can be stored outside, if any?

As an average rule of thumb, between five and ten per cent of industrial space is office space, so make sure you have enough area for your administrative needs.

Location is key, especially with warehouses. Will you be close to your suppliers and customers? Is there good availability of skilled workers in the nearby area? Remember that the industrial field needs specialised abilities, such as engineering, supply-handling and packaging; more so than the office, retail and hospitality sectors.

Should I invest?

Research has revealed that industrials, on average, will sign shorter leases than both office and retail properties. This makes sense considering that fluctuations in supplies and facilities always require firms to either upgrade or downsize their industrial space.

Recent investment patterns have revealed that rental values have risen regionally for industrials by compared to retail sites, making them worthy buys.

And the growth in e-commerce and a lack of new stock have continued to push up UK industrial property prices.

In Knight Frank’s latest Logistics and Industrial Commentary (LOGIC) report, covering the first half of 2017, they highlight a 54% increase in purchases, up from £57 million to £88 billion compared to the previous 6 months.

Industrials will generally offer slightly less returns than office space, but a major advantage is that they are less reliant on economic health and more on individual business performance.

An issue to consider is that warehouse vacancy is increasingly becoming an issue in a tough economic climate. Whilst business rates will still have to be paid by owners, it is important to note that industrial sites do not have to pay rates for up to the first six months of vacancy.

Am I suited for the industrial sector?

Like all commercial property investments, you need strong financial backing. Also consider that as you will be working with industrial equipment, storage and facilities, there will be heavy maintenance costs and a close eye needs to be kept on the safety of your employees in what is usually a quite hazardous environment.  

 



Jo Thornley

About the author

Jo joined Dynamis in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between BusinessesForSale.com, FranchiseSales.com and PropertySales.com and likeminded companies.

@BusinessMaiden

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