The UK warehouse industry – to invest or not to invest?
There is little doubt that the UK warehouse industry is thriving for commercial property investors. With huge amounts of money being injected into the sector, this is the perfect time to find the right property and experience nice returns. Welcome to the world of warehouse real estate.
Stats paint a promising picture
Recent figures by the IPD have suggested that the UK warehouse industry is a ‘safe haven’ for potential investors. As retail sales growth has slowed down, total returns for the retail warehouse sector have outperformed all other sub-sectors in the retail market. In the third quarter of 2012, returns stood at 2.4 per cent, with £952 million worth of transactions being made in the first three quarters of the year. This figure may be around 40 per cent down on 2011 figures, but the major increase in supply within the same period has encouraged potential buyers to consider the warehouse industry.
Like all forms of commercial property, buyers seem to be heading straight to prime assets, with prime yields in London sitting anywhere between 5.35 per cent and 6.5 per cent at the end of last year. However, to avoid the extremely high property values and the intense competition, analysts are advising buyers to consider secondary sites in more regional areas.
A worthy investment?
As the figures above suggest, warehouse investment may be a worthy decision, as long as you make right choices. Initially you will want to do your research to make sure you pick the right site in the right location. On a side note, never get ‘warehouse’ and ‘factory’ mixed up. Factories are industrial sites that will manufacture and process goods, whilst warehouses are commercial buildings used to store both raw and manufactured goods. You would be surprised at how many make this mistake.
For warehouses, ease of access is crucial as you will be loading and unloading supply stock on a daily basis, whilst employees will need to actually get to work everyday and have a place to park their cars.
Generally, like all forms of property, location is key. You will want to be near suppliers so your, or someone else’s business, does not incur high transportation costs, while you will also want to be in an area that has a healthy customer base.
A great way to guarantee additional revenue stream is to lease vacant space to another business. Whether you have spare storage space from your own business, or want to lease out the entire warehouse altogether, entering the rental market will mean that you essentially own two businesses; rent from your tenants and the profits gained by the eventual sale of the warehouse. This is why it is always wiser to buy more space if you can afford it. Not only does this give you extra leasing power, but it considers potential expansion and growth in the future.
In total, investment in industrial units may mean serious business for investors. As a sector, it continues to grow and thrive, meaning that it will not be long until you can begin reaping the rewards.
Author’s bio: This article comes courtesy of Topher Davies, an entrepreneur who has successfully built up his own mini empire from scratch. Originally working in the sales and marketing industry, he has broadened out into property investment among other sectors.