Multi-let Industrial: Replacing High Street Shop Window
By Danielle Sheppard
The ever-evolving landscape of e-commerce has had a positive effect on the demand for multi-let industrial (MLI) units. In a trend unforeseen by many property professionals, this demand has reached unprecedented heights, driven in part by the surge in online business to consumer retail occupiers.
Businesses are compelled to adapt and expand their logistical infrastructure to meet the growing demands of a digital marketplace and MLI estates are the accommodation of choice – replacing the traditional high street location as their principal place of work. Historically, retailers had to rely on footfall from their local high street to sell their products, but they now have access to a potentially global market through the power of social media.
This is increasingly driving niche retailers out of the expensive high street and onto their local MLI estate which offers a functional and often far more cost-effective alternative. An example is a boutique florist, previously relying on passing trade, who can now reach a substantial audience through Instagram. This applies to many occupiers and is leading to a huge diversification of the tenant base at MLI estates which, characterised by their versatile and shared spaces, have become the cornerstone for small online retailers looking to establish a robust and efficient supply chain. According to Gerald Eve’s latest Multi-Let Industrial report (Autumn 2023) currently 61% of occupiers in London and the South East are classed as ‘modern users’ (51% in the regions), which includes leisure, food retailers, logistics and quasi-offices.
This is making multi let industrial estates vibrant and exciting places to be located. Gone are the days where they were dominated by car workshops and low value manufacturing. Walking round an estate managed by BCCIM’s (a 50/50 JV between Barwood Capital and Caisson iO) I noticed an optician, a microbrewery and a martial arts centre. Other occupiers in estates managed by BCCIM include gyms, bike manufacturers and even, at one point, a funeral parlour. These estates offer a range of unit sizes, providing businesses with the flexibility to scale their operations as needed. This adaptability is crucial in the dynamic world of e-commerce, where demand fluctuations can be rapid and unpredictable.
One of the key factors fuelling the demand for MLI estates is the need for strategically located distribution centres. Proximity to major urban centres and transportation hubs is essential for swift and cost-effective delivery, meeting the expectations of today's consumers for fast and reliable shipping. MLI estates, strategically positioned in prime logistical locations, allow online retailers, small and large, to optimise their supply chain networks and minimise delivery times. As businesses continue to adapt to the digital age, the flexibility and strategic location provided by MLI estates position them as indispensable assets for meeting the logistical challenges of the online retail landscape.
The result of this changing world is that while vacancy on the High Street is increasing, MLI estates across the UK are becoming increasingly vibrant with demand far outstripping supply. While the result of this is rising rents, the space is still highly affordable compared to retail, which means there is still scope for significant rental growth before affordability becomes an issue.
BCCIM believes, therefore, that now is an excellent time to be investing in this sector, which due to constraints in supply is ideally placed for rental and capital growth.
Next month, I will reflect on how rising build and land cost is causing supply to be even more constrained in what is an already tight market.
BCCIM is a light industrial and urban logistics specialist manager with a team that has more than 100 years of combined experience in this sector, consistently delivering returns that outperform the MSCI Industrial index. BCCIM currently manages two multi let and urban logistics funds with a combined AUM of £100m. The team is currently fund raising for additional equity in the Urban Industrial Income Fund and if you would like to understand more about the opportunity, please contact Danielle Sheppard.
Photos via Pexels: Credit to Karolina Grabowska and Cottonbro Studio. MLI Estate at Nottingham, owed by Barwood's UKRI