18 June 2020

What is considered industrial property in the real estate market?

If you’re seeking a home for your industrial business, it can be tricky to know where to start. However, if you want your operations to flourish, it’s important to choose the right kind of base to work from. Here are the key things you need to know about industrial properties before you dive into your search.

What is an industrial property?

An industrial property is any building used for manufacturing, processing, storing or shipping products. Businesses in many sectors, like construction, manufacturing or engineering, need to purchase or rent an industrial building to make it possible to carry out their work. These kinds of companies can’t just store heavy machines and tools in their office building or employees’ homes, so they need to find a dedicated industrial unit for their business.

Industrial properties are designed to suit businesses that need space for large equipment, storage racks or raw materials. The UK classes all properties, whether they’re residential or commercial, and industrial properties broadly fall into category B. So if you’re on the hunt for an industrial property, and aren’t using a property search site to make the process easier, you’ll need to make sure it’s the correct class before signing any agreement.

Are there different types of industrial property?

There are three common kinds of properties that can be used as industrial units in the UK.

Property class

Permitted use

B1

Offices (that do not fall into the A2 category)

Research and development studios, laboratories and high-tech businesses

Light industry (producing goods that are sold to a customer rather than another manufacturer) suitable for residential areas

B2

General industrial

B8

Wholesale warehouses

Distribution centres

Repositories (storage units)

There are also four additional, highly niche industrial building categories:

  • B3 - Special industrial group A (businesses that work with substances covered in the Alkali, &c. Works Regulation Act 1906)
  • B4 - Special industrial group B (getting, dressing or treatment of minerals carried on, in or adjacent to a quarry or mine)
  • B5 - Special industrial group C (businesses that use heat or burning to produce substances)
  • B6 - Special industrial group D (businesses that use hazardous, corrosive or harmful materials like acids, naphthols and bitumen)
  • B7 – Special industrial group E (using animal products to produce a substance or product)

Even if a property is technically correct for your intended use, you’ll need to make sure it’s right for your business. Take B1 class properties. Many are geared towards businesses that primarily operate from computers and desks, and may not have the right space for a carpentry or small-scale clothing manufacturer for example.

If you’re looking for a very specific industrial unit, using a specialist search tool or speaking to commercial real estate agents directly will help you narrow down your options more efficiently. You need to choose the right class of industrial property for your business, as you could be evicted if you’re found to be using it incorrectly. Even if you own the property, the local authority could intervene and fine you if you’re not using it for its designated purpose.

Many properties will also be suitable for use by more than one category of business. For example, a unit that is away from residential developments could be granted permission to house businesses in any of the special industrial groups.

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How do I know if I need an industrial unit?

You’ll need an industrial unit if your company deals in physical products, whether you’re making them or selling them online. If you’re selling products to customers primarily in person, you will need a retail space. As your retail business grows you might find you also need to invest in an industrial property to keep your stock, as most retail units don’t have a huge amount of on-site storage.

It can also make better financial sense to keep goods in a storage unit, particularly if you do lots of your business online. Industrial units are let for a lower cost per square foot than retail or office spaces in virtually every area, so an additional industrial property could be more affordable than upgrading to a larger retail space.

What features should an industrial property have?

The features of an industrial property can vary greatly, and there’s no one checklist for every kind of business. Some companies will need a large unit that can house big machines, which also has a designated office space for desk-based staff. Others could be looking for a modest unit to save money and will be looking for a carefully designed space that lets them squeeze in plenty of workstations.

Most industrial properties come as a blank canvas, as the scope of their usage is pretty broad. It’s typical for them to be rented out unfurnished, so it will be up to you to pay for equipment, work benches and essentials like storage racks to kit out your unit. The benefit of having to shell out for the internal contents is that you’ll be able to take them with you if your business outgrows its current home.

Key features that you might like to look out for include:

  • Separate space for desk-based staff
  • Fixed work benches/workstation that can be fitted with your equipment
  • Outdoor yard space (either shared or private)
  • Roller shutter doors
  • Ample electrical outlets
  • Parking spaces or garage space
  • Outdoor or open-air storage space

You could find an industrial property to buy or rent that has planning permission for a trade counter, or that already has one built (with the proper permission in place). You’ll usually find this kind of property within an industrial estate, so start your search here if you’ve got your sights set on having a trade counter.

What can an industrial property be used for?

As previously mentioned, an industrial property can be used by any business that makes or stores goods. It’s a pretty broad spectrum, ranging from boutique clothing manufacturers and bespoke craftsmen to multi-national car, machine or chemical producers. Of course, a business will need to make sure it chooses the right class of business. Here’s a list of the kinds of companies that can occupy the three most common classes of industrial property.

  • B1 – any kind of desk-based business, a scientific research operation (excluding those in the special industrial groups), tech support, equipment manufacturer, customer-focused goods manufacturer (including anything from water bottles all the way up to white goods and cars). If the unit is within a residential area, it must not be let to manufacturers that use exceptionally noisy machines or procedures.
  • B2 – any business that doesn’t fit into B1 (excluding special industrial groups), like heavy manufacturing for sale to other manufacturers
  • B8 – an online ecommerce company, self-storage provider or distribution centre for a shipping company

Savills has also noted that there’s an increasing trend in landlords converting traditional industrial properties into leisure units. Industrial unit take-up has increased by more than 55% above the long-term average, particularly in northern England, as tenants seek a cheaper base. It can be a relatively simple process for landlords to get permission to convert a B-class property to a D-class leisure property, as long as the local planning authority approves.

Many industrial unit owners are choosing to rent to gyms and other sports-focused companies, who want to take advantage of the high ceilings, spacious floor plans and lower rents. If you’ve got your eye on an industrial property for a non-industrial purpose, it’s worth speaking to the landlord. They could be in the process of converting the property to get in on the profitable new trend, particularly if the area is not a hub for industrial businesses.

Want to learn more about renting a commercial property for your business? Check out another one of our tenant guides and get clued up on all things real estate.