The Industrial Property Opportunity
**Industrial and warehouse property** has become the standout performer in UK commercial real estate. Driven by the growth of e-commerce, supply chain restructuring, and nearshoring trends, demand for logistics, distribution, and manufacturing space has consistently outpaced supply. For lenders, this translates into strong confidence in the asset class, making industrial property one of the most financeable commercial property types available.
This guide covers everything you need to know about financing industrial and warehouse property, from the types of property lenders favour to the practical steps for securing competitive terms. For general commercial mortgage guidance, see our [complete guide to commercial mortgages](/knowledge-hub/complete-guide-commercial-mortgages-uk).
Types of Industrial Property
The industrial sector encompasses a broad range of property types:
Distribution and Logistics Warehouses
Large-scale warehouses used for storage and distribution, typically 50,000 to 500,000+ square feet. These are the properties most directly benefiting from e-commerce growth, with major occupiers including Amazon, DHL, Royal Mail, and third-party logistics providers.
Lenders view distribution warehouses very favourably, particularly those in the "Golden Triangle" (the area between the M1, M6, and M69 motorways) and other prime logistics locations.
Light Industrial Units
Smaller units (1,000 to 10,000 square feet) used for light manufacturing, assembly, storage, and trade counter operations. Often found on established industrial estates, these are a staple of the commercial property market.
Lenders are comfortable with light industrial, which has consistently low vacancy rates and stable rental growth across most of the UK.
Multi-Let Industrial Estates
Collections of industrial units under single ownership, let to multiple tenants. These estates provide diversified income streams and are popular with both investors and lenders. The management is more intensive than single-let properties, but the risk is spread across multiple occupiers.
Manufacturing Facilities
Specialist buildings configured for specific manufacturing processes. These range from food production facilities to engineering workshops. Lending depends heavily on how easily the property could be re-let or repurposed if the current occupier vacates.
Self-Storage Facilities
The self-storage market has grown significantly, with both large operators (Big Yellow, Safestore) and independent facilities. Financing is typically assessed on a business basis rather than pure property lending, as income depends on operational management and occupancy.
Trade Counter and Showroom
Properties combining warehouse space with a retail-facing trade counter or showroom. Common for building supplies, plumbing merchants, car parts, and similar trade businesses. These are well-understood by lenders and generally attract good terms.
Why Lenders Favour Industrial Property
Industrial property enjoys some of the strongest lender appetite in the commercial mortgage market. Several factors drive this:
Strong Demand Fundamentals
The UK has a structural shortage of industrial and logistics space. Planning constraints, loss of industrial land to residential development, and growing demand from e-commerce and reshoring have created a supply-demand imbalance that supports both rents and values.
Low Vacancy Rates
National industrial vacancy rates have remained at historically low levels. Even during economic downturns, vacancy rates for well-located industrial property have stayed well below those for offices or retail.
Flexible Use
Industrial buildings are relatively adaptable. A standard warehouse can serve multiple functions, from distribution to manufacturing to trade counter, making reletting easier if a tenant departs.
Lower Obsolescence Risk
Compared to offices (where specification requirements change rapidly) or retail (where consumer behaviour shifts constantly), industrial buildings have a longer useful life with lower refurbishment costs.
Proven Rental Growth
Industrial rents have grown consistently over the past decade, outperforming other commercial property sectors. This gives lenders confidence in the sustainability and growth of income.
**Key Takeaway:** Industrial property's combination of strong demand, low vacancy, adaptable use, and proven rental growth makes it one of the most attractive asset classes for commercial mortgage lenders. This translates to better LTV, more competitive rates, and wider lender choice for borrowers.
LTV and Rate Expectations
Industrial property typically attracts the most competitive commercial mortgage terms:
Standard Industrial/Warehouse
- LTV: Up to 75%
- Rates: From 5.5% to 7.5%
- Term: 10-25 years
- Assessment: Rental income (investment) or business profits (owner-occupier)
Large Logistics/Distribution
- LTV: Up to 70-75%
- Rates: From 5.5% to 7%
- Term: 5-15 years (often aligned to lease term)
- Assessment: Tenant covenant, lease length, location
Multi-Let Industrial Estate
- LTV: Up to 70%
- Rates: From 6% to 8%
- Term: 5-15 years
- Assessment: WAULT, tenant mix, occupancy history, estate condition
Specialist/Manufacturing
- LTV: Up to 65%
- Rates: From 6.5% to 9%
- Term: 5-20 years
- Assessment: Adaptability, alternative use potential, borrower strength
Use our [commercial mortgage calculator](/calculators/commercial-mortgage) to model costs for your specific requirements.
How Lenders Assess Industrial Property
Location and Accessibility
Access to the motorway network is the single most important location factor for industrial property. Lenders favour properties within:
- 5 miles of a motorway junction
- Established industrial corridors (M1, M6, M62, M4)
- Areas with strong local labour markets
- Locations with good HGV access and appropriate road infrastructure
Building Specification
Key physical characteristics that lenders assess:
- Eaves height: Modern logistics operations prefer minimum 8-10m clear height; older units at 4-6m are less valuable
- Floor loading: Important for heavy industrial or high-density storage
- Yard and loading: Adequate turning space and loading dock facilities
- Power supply: Sufficient electrical capacity for modern operations
- Condition: Roof condition is a particular focus, as warehouse roof repairs are expensive
- Asbestos: Many older industrial buildings contain asbestos, which must be properly managed
Contamination Risk
Industrial properties carry a higher contamination risk than other commercial assets due to historical use. Lenders will typically require:
- An environmental search as part of the legal process
- A Phase 1 environmental assessment for older sites or those with potentially contaminative history
- Potentially a Phase 2 intrusive investigation if risks are identified
Contamination does not automatically prevent lending, but remediation costs and ongoing liabilities must be understood and factored into the assessment.
Tenant and Lease Analysis
For investment purchases, the standard lease and tenant analysis applies:
- Tenant covenant strength and trading history
- Unexpired lease term (minimum 3-5 years preferred)
- Rent level relative to market evidence
- Repairing obligations (FRI leases preferred)
- Break clauses and rent review provisions
**Key Takeaway:** Industrial properties with good motorway access, modern specification, clear environmental status, and strong tenants on long leases represent the ideal lending proposition. Properties lacking some of these features can still be financed, but with adjusted terms.
Owner-Occupier Industrial Finance
Many industrial mortgages are for businesses purchasing premises from which they operate. This includes manufacturers, distributors, trade businesses, and service companies. The assessment for owner-occupier industrial mortgages considers:
- Business trading performance: Two to three years of profitable accounts
- Rent replacement: If the business currently rents similar premises, this demonstrates affordability
- Business growth: A growing business with a clear need for the premises strengthens the case
- Director strength: Personal assets and financial position of the guarantors
- Property suitability: The building must be appropriate for the stated business use
Owner-occupier industrial mortgages can be particularly advantageous, as the business builds an asset rather than paying rent to a third party, and the property may appreciate over time.
The E-Commerce and Logistics Boom
The growth of e-commerce has fundamentally changed the industrial property market. Key trends that borrowers and investors should understand:
Last-Mile Logistics
The demand for delivery speed has created intense competition for warehouse space close to population centres. "Last-mile" distribution facilities near major cities command premium rents and exceptional lender appetite.
Urban Logistics
Smaller industrial units within urban areas are being repurposed for last-mile delivery, dark kitchens, and urban fulfilment. These properties have seen some of the strongest rental growth in the market.
Cold Storage
The growth of online grocery delivery has driven demand for cold storage and temperature-controlled logistics facilities. This specialist sub-sector attracts strong lender appetite, though the additional building services increase the complexity of assessment.
Automation and Robotics
Modern logistics facilities increasingly incorporate automated systems, requiring specific building specifications (higher eaves, stronger floors, reliable power). Properties suitable for automation command premium rents and valuations.
Environmental and Sustainability Considerations
Sustainability is increasingly important in industrial property finance:
- Solar panels: Many industrial roofs are ideal for solar installations, which can generate additional income or reduce operating costs
- EPC requirements: The same minimum EPC requirements apply to industrial property as other commercial buildings
- Net zero commitments: Many corporate occupiers are requiring landlords to meet sustainability targets
- Green finance: Some lenders offer preferential terms for properties with strong environmental credentials
Active Lenders in Industrial Property Finance
The industrial sector benefits from wide lender appetite:
- Lloyds, NatWest, Barclays, HSBC: Competitive for established businesses and prime logistics
- Aldermore, Shawbrook, Allica Bank: Flexible on smaller lots and SME owner-occupiers
- Hampshire Trust, Atom Bank: Good appetite for light industrial and trade counter
- Investec, Paragon: Larger portfolio and specialist industrial lending
- LendInvest, Redwood: Bridging and short-term solutions for industrial acquisitions
At Commercial Mortgages Broker, we have extensive experience financing industrial and warehouse property across the UK. [Contact us](/contact) to discuss your requirements.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*