As commercial property estate agents for Staffordshire, Cheshire, Shropshire and beyond, we provide essential support for commercial buyers and investors at every stage of the property search and purchase. We understand that buying with confidence requires clarity and deliver the latest knowledge and experience in the field to ensure our clients have the information they need to achieve their commercial property goals.
A vital part of commercial real estate is industrial property. In this blog post, we take a closer look at industrial property and explore the integral role it could play in your property portfolio.
What is industrial property?
Commercial property is generally categorised as three main types – retail, office and industrial. These labels relate to their intended use, but industrial property is considered the most versatile property type. Industrial properties come in all shapes and sizes and can serve a wide variety of industry sectors. Industrial isn’t just a label used to describe large factories, it applies to single and multi-storey buildings, warehouses and centres used for logistics and distribution.
Why should I invest in industrial property?
Industrial property investment is a growing sector and for good reason. Industrial properties are currently serving an entrepreneurial and growing number of individuals seeking good quality accommodation to both manufacture products and store and distribute goods. As a country, we import a vast range and quantity of goods from all over the world, to a large extent fuelled by internet-based companies, who will buy in bulk and distribute smaller quantities of products to individual clients.
Before the last recession, over 10 years ago now, a number of developers would speculatively build industrial units of various sizes however, many of these organisations were left financially exposed when the recession hit and as a consequence speculative new-build development almost ceased overnight. As a consequence, the supply of good quality industrial buildings diminished against what is now a healthy demand, so good quality freehold industrial units are not only renting quickly but are also seeing increases in rental values due to the basic economic principle of supply and demand.
Industrial property is also seen as a solid long-term investment, due to the fact that there will always be a need to both manufacture and store products. Current changes in trends with retail properties are starting to affect the desirability of traditional shop premises as investments. Likewise, office accommodation is also becoming slightly less popular, as an increasing number of companies are starting to look at more environmentally and socially friendly ways of operating to include working from home, hotdesking and more flexible lease terms.
There is also a greater period of time that an empty industrial property will escape the penalty of having to pay empty business rates if the property is vacant. Retail and office accommodation only qualify for a period of 3 months during which time no rates are payable however, if an industrial property is vacant it is exempt from rates for up to 6 months.
What should I consider when buying industrial property?
Despite the many benefits mentioned above, purchasing industrial property doesn’t come without its risks. Market conditions in many industrial sectors and locations can make businesses vulnerable and leave industrial properties fully or partially vacant for long periods. Due to some of the advantages mentioned above, industrial property can also command a price that gives an investor a slightly lower return on investment than say an office or retail property, which is reflective of the risk.
Purchasing industrial property in the right location is the key to success. Demand for industrial space is particularly high in the Midlands (including Staffordshire, Cheshire and Shropshire). Manufacturing businesses for example are keen to set up a base in these areas to benefit from their excellent transport links and lower rents.
Modern portal framed (single span) buildings will always prove more popular than older properties as they will generally require less in the way of maintenance and will also be more thermally efficient, which from an environmental point of view is becoming increasingly more important. There is a greater demand for smaller units or between 1,000 sq ft - 2,000 sq ft, which is simply due to the fact that there are more smaller businesses than larger ones.
Generally speaking, industrial buildings are also more straight forward to look after if they do get damaged and when looking at industrial buildings to buy it is extremely important so make sure that the property is in good condition as a dilapidated building will always be more difficult to re-let.
Is industrial property investment right for me?
Investors looking to buy an industrial property investment do not necessarily need a large budget, as small individual units can be acquired, however it is important to remember that industrial property investment is a long game, with long-term leases providing a great return on investment for years to come upon finding the right tenant.
By considering the rewards and risks and basing your search on popular locations and types currently in demand, you can make the right industrial property investment. For further information on industrial property and its investment potential, please contact our team. You can also browse our portfolio of commercial properties right here.