On the day that the UK’s GDP grew by slightly more than expected, many small businesses are worrying about what the future holds for them. Brexit negotiations in Brussels are not going according to plan, whilst the rising cost of living is restricting what SMEs can afford in terms of office space.
In Scotland, interest in many commercial properties seems to be slowing down. Edinburgh, for example, saw investment of £326m in commercial property last year, down from just over £400 million in 2016. Glasgow also saw a decrease in the purchase of offices and retail space within the same time period.
Many office spaces for small businesses have seemingly become prohibitively expensive, particularly in prime city centre locations. Startups in particular may find their ideal new office beyond their reach. However, the alternative of moving to industrial units on the outskirts of major cities or beside a busy motorway may be an appealing, cost-effective route.
Safe investment
As an investment, buying or renting an industrial unit makes sense for some businesses. Those that are close to major roads can help to improve logistics and make it easier to attract clients. This makes sense for companies who have products to sell or vehicles to store – retailers in particular would see industrial units as a sensible investment.
In the Central Belt, there are a number of industrial units to let from property firms like LCP. Much of Scotland’s economy is reliant on what happens there. Fortunately, there is a supply of units that give SMEs a viable alternative to a city centre office space, from the mouth of the Clyde to East Lothian.
When sold, industrial units and whole estates can change hands for a surprisingly high amount of money. Earlier this month, the West Telferton Industrial Estate in Edinburgh was sold for £2.5m. Comprising of 11 units, that equates to £227,000 per unit, which is close to the average UK house price.
Different uses
Letting a property rather than buying it is often the only option for smaller businesses. Spending money on a deposit for an industrial unit will be beyond their means. This type of commercial property does give businesses more flexibility in what it can be used for. In many cases, storage, delivery and sales can all be conducted in the same unit.
Going down this route makes perfect sense for a company that doesn’t have the means to rent two commercial properties. Recent statistics from the Royal Institute of Chartered Surveyors (RICS) suggest that a growing number of commercial property occupier demand for industrial units is far higher than that for office and retail.
According to RICS’ survey for the second quarter of 2017, occupier demand for industrial units is far higher than that for office and retail. In the same survey, more respondents believed that market valuations of commercial properties were too expensive than they did in the first quarter of this year.
Investment enquiries for industrial units are also higher than for their office and retail equivalents. This trend could continue if industrial units retain their appeal to SMEs.
