Finance For Multi-let Industrial Investment

For ambitious investors, the potential promised by MLI units is almost limitless, driven by the following:

• Digital innovation has changed UK business and led to an increased need for areas suitable for warehousing, order fulfilment, manufacturing etc – all whilst still housing a small office on the same site to optimise costs. 
• Consumer behaviour and expectations have driven an increase in Click’n’collect and next day delivery style purchases, all of which require cost-effective floorspace to fulfill. 
• Planning rules make light industrial units a flexible option for selling, manufacturing, dispatching and storing goods all under the same permission. 

If you’re interested in buying multi-let industrial units for investment, we can help. Rangewell work on your behalf to discuss your goals, work out your borrowing requirements and then assess the lender’s market. Our team will identify lenders who specialise in this type of property and find the right deal for you – all at no additional cost.

Why are MLI units a good option for investment?

The evolution of UK society and business as a whole has helped increase the demand for industrial units as commercial premises. eCommerce brands, for example, can utilise industrial spaces to combine activities such as warehousing and logistics with small office areas to cater to reduced teams or semi-remote workers. 

According to a Savills report, MLI in some areas are commanding rental yields of up to £10 per sq ft and growing at a rate of 25-50p every three to six months. As demand increases, so too does the need for developers to step in and offer suitable industrial units for businesses. 

MLI isn’t just good for an investor – it’s also good for business tenants. Occupiers can spend less on their rental bills and focus on growing their business, so you’ll be playing an active part in helping grow UK industry. 

MLI property can outperform other alternative real estate options, especially as new business types push demand even further. The modern MLI occupier space appeals to many different types of business, including:

• Offices and archiving
• Trade counters and wholesale
• Retail and business storage
• Leisure
• Off-site services
• Engineering
• Manufacturing
• Logistics
• Food manufacturing 

This broad appeal makes them a strong option for investors who want to maximise their reach to a variety of occupiers. 

In addition, MLI units are often located in in-demand areas where population density is high and competition for alternative commercial premises is fierce. This can create great opportunities to appeal to small businesses that want to combine storage and shopfront capabilities, allowing them to house small shops as part of their unit. 

MLI investment also helps optimise land usage. Where the price of land is at a premium, multi-let industrial units help offer premises and capacity to multiple businesses within a single site – generally within an in-demand area or located near specific points of value such as ports or motorway access points. 

What do investors need to consider?

Purchasing a multi-let industrial unit or splitting an existing industrial unit into a multi-use property requires capital – which means most investors turn to lenders to raise loans. As a non-traditional form of property leasing, you may find some lenders lack the right support to give you suitable finance for the purchase. In most cases, you’ll need a relatively high deposit as the loan to value won’t be too attractive. 

To improve your chances, you’ll need to first identify lenders who have experience in financing industrials and similar projects. You’ll then need to assess your business plan and improve it as much as possible to ensure it best represents your goals and shows favourable financial forecasts. 

Demonstrate to a potential lender how you plan to lease your units – many landlords are offering more flexible leases to appeal to growing SMEs that need dynamic space to house their business. Others are investing in a serviced offering whereby each unit is provided with cleaning, utilities or other equipment included in the lease. 

In summary, before investing you should assess:

• Your background: how can you best represent yourself to the lender? Do you have an existing portfolio, or have you worked to manage similar sites in the past? 
• Assets: do you have personal assets you’re willing to offer as security to help mitigate risk? 
• Credit history: is your personal and business credit history in order? Though it may be harder to find loans if your history is subpar, it’s not impossible – Rangewell can still help you find finance with impaired credit.  
• Property details: consider the planning permissions on the property, the condition it’s in, whether it will need further work, if it’s already occupied etc. The more detail you can bring to the lender to represent value, the better. 
• Loan value: do you know the sales value of the MLI? If it’s a development project, do you have projected costs? The bigger the loan you need, the more deposit you’ll have to provide and the more important it is to arrange rates that suit your plans. 

What types of loan are suitable for buying an MLI? 

The type of finance you apply for depends on your current situation and your plans for the investment. Some loans offer longer-term repayment and subsequently, more affordable monthly payments spread out across that term. Others are shorter-term with higher rates and repayments. 

Bridging finance is ideal if you’re looking to make a rapid acquisition, such as capitalising on a property auction listing. With Rangewell’s help, you can get a bridging loan with funds issued in a matter of days from your first enquiry. 

A more general financing option is a commercial mortgage which is designed to spread your repayments out across a longer term. This may lead to a more expensive loan overall, but allows you to make smaller regular repayments as you accrue rental income. 

Building or converting MLI property

If you’re considering a development project to build an MLI, or you want to turn an existing industrial property into an MLI, you’ll need a different kind of finance. Unlike completed, operational units which you can purchase with a commercial mortgage, development projects don’t have a recognised sales value. Instead, loans are based on either the completed ‘bricks and mortar’ value or, in some cases, the projected value of the commercial business once development completes. 

Development finance requires a larger deposit compared to other forms of loan, but Rangewell can help you reduce the initial deposit requirements or help you find other ways to alleviate the burden on your cashflow. Speak to our team now if you’re considering a development project and we’ll talk you through your options. 

If you can work with a lender to have them recognise that latter value, you can raise a higher loan because the MLI will be worth more as a functional business with occupiers than it would be when compared to its initial value when development is finished. Rangewell can help you arrange this type of borrowing and find lenders who will support you. 

Get MLI finance with Rangewell

Whatever your plans, if you’re aiming to buy, build or convert MLI property and need capital to support your ambitions, Rangewell can help. Talk to our team today and we’ll help you complete your multi-let industrial investment by securing the best possible rates and term to suit your long-term strategy.