Industrials is Stenprop’s UK multi-let industrial operating platform. Visit site
Structural shift in long term demand for industrials driven by:
Severely constrained due to:
The units are generic in nature, and so can adapt and change to different tenant requirements. Smaller properties also appeal and work for the widest possible number of tenant businesses. The larger the property, the smaller the occupier pool.
MLI design hasn’t changed significantly in 30 years. This means that units have enduring operational functionality, and so the utility tenants can get from them does not change over time. This is not the case in other sectors where design evolution and tenant requirements change meaning that older properties are less valuable/useful to tenants.
Rents are low in the MLI sector, and typically form a very small proportion of the overall turnover of tenant businesses (Stenprop estimates that rent represents between 1-2 per cent of tenant business turnover.). Tenants are often insensitive to rent as a result, meaning that even with rental growth the units remain sustainable and affordable.
Typically MLI tenants are small occupiers who are unrepresented in transactions. Discussions are generally held directly with the principal owners. This makes negotiations more direct and more about meeting tenant expectations. Tenants are less concerned with comparable market evidence and more focused on the absolute levels of rent they will pay relative to their own affordability and on the service provided by the Landlord.
MLI and trade-counters are the most expensive industrial assets to build. An MLI estate will typically cost around £110-125 psf to build after land and fees. This compares to c. £40-50 psf for logistics warehouses or larger solus units. Build costs are higher due to the additional cost of installing multiple utility supplies, walls, doors, offices, kitchens, toilets etc. This significantly reduces the potential for new supply to come into the market as, based on current sale and purchase yields, rents would need to be c£8 psf or higher for this to be economically justifiable. Passing rents on most estates are currently £5-6 psf, so significant growth is required to reach these levels.
