Why new build smaller industrial units are integral to service local economies and diverse occupiers

Author:
Alastair King Head of Development
020 7657 1882
Read time: 4 mins
Category: Ideas

Local economies are built on a diverse range of SME businesses. To serve these businesses, high-quality modern industrial units are required to meet their needs.

However, there is currently an undersupply of ‘Grade A’ stock across the UK. Some areas have not seen any development in more than 20 years and vacancy rates are below five per cent. This makes the development of new, small to mid-sized industrial and commercial units crucial.

Without this supply of new Grade A industrial units, smaller businesses may be unable to find suitable accommodation be it securing their first premises or expanding their operations to facilitate growth. This will ultimately negatively impact local economies.

New genres of business are driving demand…

There is a common misconception that industrial units are for large-scale logistics and manufacturing companies operating out of ‘big boxes’. The reality is that the total cumulative sq ft of smaller units far exceeds the total accommodation provided by larger units.

Businesses taking smaller space is not headline grabbing news in isolation. These companies tend not to be household names and thus the scale of take up is not well documented. However, these businesses are integral to supporting and growing both the national and local economies.

In this market a diverse range of occupiers take space, with the vast majority being outside of the ‘traditional’ industrial sectors.

Local craft breweries are a good example of this. There has been huge growth in this sector, proven by the extensive ranges now available online, in shops and hospitality venues. This has created demand for smaller units for brewers to operate from.

Other examples are independent bespoke furniture or kitchen unit manufacturers, online pharmacies, photography studios, artisan food companies, and truly last-mile food deliveries. Such operations don’t require 50,000 sq ft or 100,000 sq ft units to serve their local area – they need something much smaller to suit their operations and customers.

At Chancerygate, we work with occupiers from a wide range of sectors looking for industrial space. Recent occupiers have spanned from food manufacturers and engineering firms to theatrical stage designers and even a blacksmith.

In the majority of instances, these businesses will serve the local area, so having premises which are well-connected to the surrounding region and sized to their operational requirements is imperative. These occupiers increasingly demand well specified, modern units with strong ESG credentials. This demand can only be met by new Grade A supply.

… alongside the ecommerce phenomenon

The proliferation of e-tail is well documented. More than a quarter of all retail sale transactions now take place online, reaching a record peak of just over 37 per cent across the period November 2020 – January 2021. This increase in activity has driven some businesses to move away from having a ‘high street’ presence and switch to a purely online model.

E-tail has opened up a wider market for those SME companies that have traditionally focused on supplying their local region to being able to have a national and increasingly international exposure.

A regional location is no longer seen as a potential disadvantage as sales take place online and revolutionised delivery networks allow goods to be delivered easily and quickly to clients across the whole of the UK and beyond.

Growing ecommerce businesses with a need to expand out of their existing premises are increasing the current demand for industrial units. These range from previously home-based retailers which can no longer accommodate their operations in their spare room or garage to growth companies requiring more floorspace due to increased business and headcount.

The supply / demand conundrum

Some areas of the UK have seen no speculative small unit development in more than 20 years, meaning potential occupiers are faced with outdated units which do not meet their requirements.

The construction of modern, better quality and well-presented industrial units and the business parks in which they sit allow for office and company HQ functions to be brought under one roof alongside manufacturing and warehousing operations.

A fundamental part of our strategic decision making when considering new development opportunities is to choose locations where new stock is required to meet the needs of the smaller, diversified businesses. We look to provide high-quality small to mid-sized space to serve and support local businesses.

Developing smaller units means not only can we attract a much more diverse range of businesses, which offsets risk and widens demand and improves investment rationale, but also serve local and regional SMEs which need new, high-quality space.

Supporting entrepreneurs and economies with industrial property

Provisions of high-quality small to mid-sized industrial space is imperative to enable local economies to grow and entrepreneurs to prosper.

These units support a diverse occupier base, serving companies from food manufacturers and brewers to photographers and interior designs – all of which play a role in bolstering an area’s employment and financial output.

At Chancerygate, we’re committed to building speculatively to meet the needs of SMEs through creating multi-unit developments in areas which require modern high-quality industrial property. We have a range of industrial units available on a freehold or leasehold basis in strategic locations across the UK.

Find out more about our live projects here, or for contact Alastair directly for further information on how we can support your business’s commercial property requirements e: aking@chancerygate.com t: 020 7657 1882

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