Industrial and Warehouse Commercial Mortgages London

Underwriting a London industrial commercial mortgage

London industrial enjoys the broadest lender appetite of any commercial sector, and the reason is supply. Greater London is 607 square miles with over nine million residents at a density of nearly 15,000 people per square mile, and a large share of its remaining industrial land sits inside Opportunity Areas earmarked for housing and mixed-use: Old Kent Road, Poplar Riverside, Charlton Riverside, Bexley Riverside, London Riverside, Royal Docks and Beckton Riverside among them. Each Opportunity Area is designated to deliver a minimum of 5,000 jobs or 2,500 homes. Industrial floorspace is therefore a shrinking asset in a growing city, and lenders underwrite it knowing the land has an alternative use underneath it.

The market splits four ways. Park Royal, the largest industrial estate in Europe, straddling Brent and Ealing in NW10 and now inside the Old Oak and Park Royal Development Corporation area. The Heathrow logistics belt through Hillingdon and Hounslow, where Heathrow and Hayes are both designated Opportunity Areas and airfreight and airport supply-chain occupiers dominate. Last-mile urban logistics in the inner east and south, small and mid-sized units serving same-day and next-day delivery into central London. And multi-let trade and light industrial estates across the outer boroughs, which is where most brokered volume sits at £500K to £5M.

Investment underwriting tests ICR at 140 to 155%. Multi-let estates are treated favourably rather than as a complication, because income spread across a dozen small occupiers is genuinely more resilient than a single tenant on a five-year break. Owner-occupier industrial is the keenest-priced commercial mortgage on the panel: an established business with two years of clean filed accounts and EBITDA cover of 1.3 to 1.5x borrows to 75% of bricks at 6.0 to 7.5% pa. That is a lower rate than most of these businesses pay on unsecured business loans, which is the single most useful thing an owner-occupier borrower can be told.

Illustrative sizing. A Park Royal light-industrial unit at £1.6M bought by the operating business, with EBITDA cover at 1.5x, sizes at 70 to 75% LTV and prices in the low sixes to low sevens with Lloyds, NatWest, Allica or Shawbrook. A four-unit multi-let estate in Newham at £3.4M with £250K passing rent across mixed covenants sizes at around 70% on a 145% ICR and prices in the mid to high sevens with Shawbrook, InterBay Commercial or Cambridge and Counties. Vacant units route through commercial bridging at 8.5 to 11.0% pa with a letting exit.

Finance structures for London industrial

Let assets route through a commercial investment mortgage on ICR. Owner-occupiers route through the EBITDA-cover product at the keenest rates on the panel. Multi-let estates and multi-asset holdings consolidate through portfolio refinance. Vacant units route through commercial bridging with an agreed letting exit.

Lender appetite for London industrial

This is the broadest appetite of any commercial sector, and the competition shows in the pricing. NatWest, Lloyds, Barclays and Santander all compete on let industrial with decent covenants at 6.5 to 7.5% pa at 65 to 70% LTV, and on owner-occupier purchases at 6.0 to 7.5% pa to 75% of bricks. Allica, Shawbrook, Hampshire Trust, Cambridge and Counties and Aldermore dominate the mid-market and the multi-let estates at 7.0 to 8.0% pa. InterBay Commercial, OakNorth and Together take value-add stock, shorter leases and estates with a vacancy at completion at 7.75 to 8.5% pa. Trade counter prices at the keen end of investment because the covenants are stronger than typical industrial tenants. Multi-let estates get among the fastest credit turnarounds on the panel, provided the rent roll and the tenancy schedule are clean when they are submitted.