Buying an industrial unit: what you need to consider

An industrial unit with a shutter door

Whether you’re buying your first business premises or your one-hundred-and-first, the scale of the commitment is the same – and this is doubly true for an industrial unit.

It’s not just about securing the relevant permissions and sorting the finance, as important as these steps are. Below are five important factors you should consider when selecting an industrial unit for your business.

1. How accessible is the unit?

Industry means goods, and goods mean transport. Most units on industrial estates are well-equipped to handle collections and deliveries from large vehicles, but consider the volume of traffic you are expecting and whether the loading bay looks up to the task.

If you are converting other premises, this consideration becomes all the more important. You will need plenty of space for access, egress, loading and unloading, and main road access to boot. And if vehicles will be on the premises overnight, damage and theft add to your potential issues – so you might wish to ensure there’s somewhere to secure them.

2. How staff-friendly is the location?

No-one likes a difficult commute. If you’re moving location, pay careful thought to how the change will affect your staff. If you will be taking on a new workforce, make sure that your new unit is accessible, with good transport links and road connections and ample parking.

Also make sure that the unit has adequate break and recreational facilities for your employees, which might even extend to showers and locker-rooms if the type of work they’ll be doing is particularly heavy.

3. How close are local amenities?

Transport links are not your only concern – you should also make sure that your industrial unit is within a short distance of:

  • A bank, so that you having the ability to deposit cash and cheques from clients (being able to deal with your own funds face-to-face with an advisor also doesn’t hurt).
  • A post office. Businesses (particularly small businesses) often receive and send out a great deal of mail, and you will likely be taking large deliveries as well. Being able to deal with these matters without dedicating significant time and resources is a boon.
  • Shops and entertainment. An easy commute is just one contributor to a happy workforce; being able to enjoy a social life with colleagues at the end of the day is another. You could find that proximity to shops and nightlife helps with staff retention.

4. Can I convert premises instead?

After paying due thought to considerations 1 through 3, you might find that none of the units in your area are suitable. Alternatively, you might have found cheaper or more suitable premises that were or are intended for a different purpose.

In this case, you will need to apply for planning permission to convert the property. There are but two exceptions regarding industrial usage classes, and these pertain only to ‘light’ industrial units (those considered appropriate in a residential area):

  1. Conversion of ‘general’ industrial (class B2) to business, including light industrial (class B1); and
  2. Conversion of storage and distribution facilities (class B8) – with floor space not exceeding 500 m2 – to business, including light industrial (class B1)

Find out more about change of use on the Gov.UK Planning Portal.

5. Can I afford the investment?

The final consideration is arguably the most important. As an expanding business, you likely have the room for growth, but exactly how much slack there is and how much you can spare will depend on your business and your future plans.

Firstly, you will need to service the added debt. Your commercial mortgage lender will most likely calculate your ability to do so using your adjusted net profit (meaning your net profits with depreciation, interest, taxes and other costs added back into it). (Alternatively, if the industrial unit is to rent out, your lender will calculate debt coverage based on the market rent.)

You will need to consider transportation costs, particularly if your new unit will contain heavy machinery. If the unit is an addition to your facilities, you will need to factor in the cost of additional staff – recruitment, salaries, benefits and so forth. And you will need to consider business rates, which are payable on most non-domestic properties, including industrial units.

Find out about business rates on the Gov.UK website.

A final note

The points presented in this article are pertinent whether you are buying an industrial unit for your own business, or to let out to someone else’s. This is because a prospective tenant will be asking the same questions about a rental unit as would a buyer – and if not, they’ll soon learn the hard way that they should have been!

To discuss the finance for your next commercial venture – be it an industrial unit or any other investment – get in touch with our team on one of the numbers above, or get a quote to arrange a call back.

This information should not be interpreted as financial advice. Commercial mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.