As demand for industrial developments continue to evolve, lenders should be increasingly aware of what to look out for when deciding to invest in an asset.  

Explore our 5 top tips to gain sector specific insights and wider industry advice when lending on industrial schemes. 

Establish a tenant strategy  

• Set up your tenancy management strategy as early as possible, tenant desired changes can often be a source of contention.  
• Engage early with tenants and have a clear strategy from the jump to mitigate any potential barriers – there won’t be time to as the project progresses (e.g. slab joint layout against racking design, early access provisions etc). 
• Consider whether rent-free periods can be adjusted in case tenant works prolong the programme. Build periods on industrial units are tight (usually under 12 months and sequentially arranged) leaving limited flexibility.  

Ensure timelines are aligned 

• Timelines must be aligned between completing funding arrangements and execution of the building contract.  
• Contractors typically price their projects based on specific timeframes. If there are delays in the execution, the works may need to be re-tendered. Postponements, particularly into the winter months, can lead to increased costs and extended timelines.   

Consider your ESG criteria  

• Clearly defining your ESG criteria is essential as when the design approaches contract stage, it is difficult and costly to incorporate any ESG improvement amendments.  
• While much attention is given to EPC and BREEAM, it’s also important to evaluate other aspects such as; CRREM, achieving net zero carbon – in both construction and operation, the number of EV chargers, and how these considerations are incorporated into the facility, and subsequently reflected in the build contract. 

Review specification and power requirements

• It’s paramount to look at the current and potential energy uses. A few Important questions to ask are:   
  • Does your building have sufficient capacity for a range of tenant’s operations?  
  • Has the roof been designed to allow for the installation of PV panels?  
  • Do elements such as: car parking; haunch height; slab spec; incoming power sizing; yard depth etc meet current market norms?  
  • Are there Future expansion options? e.g. ability to increase office space, car parking provision, flexibility for sub-division. 

Understand Environmental conditions

• Prior to making a commitment, understand the site conditions.  
• Conduct a peer review of environmental reports, contract allocation of ground risk, check how up to date the site investigations and underlying data models are (e.g. is there a flood risk, when was this last modelled?)   

Need help? We’ve got you covered! 

To maximise the chances of success, it’s essential for lenders to have a comprehensive understanding of all the risks posed with funding in the industrial sector. Our ‘top tips’ provide the main factors to watch out for, in both service specific elements and wider implications.  

Our experts are always available to assist and answer your questions. We provide specialist, in-house advice on all these key points plus more, including ESG and Energy Solutions services. 

Get in touch with our Heads of Development Monitoring Phil Hughes and Ben Murphy for support or further information, we’d love to chat.