What Makes a Good Small Industrial Property in Hertfordshire?

There has been plenty written about the industrial-property market over the last few years. Much of it concerns very large distribution warehouses, national logistics companies and investment transactions worth many millions of pounds.

That is quite different from the smaller industrial-property market in which AMV Property Holdings operates.

Smaller units are generally occupied by local and regional businesses. These might include engineering companies, trades, specialist suppliers, distributors, light manufacturers and businesses needing a combination of warehouse and office space.

In my view, the prospects for this type of property cannot be judged solely by national statistics. What matters most is whether a unit is in the right location, works properly for its occupier and could be readily adapted for another business in the future.

Hertfordshire remains well placed

Hertfordshire’s main advantage is its location.

The county sits immediately north of London and benefits from the M25, A1(M), M1 and A414. It also has established commercial centres including Hatfield, Welwyn Garden City, St Albans, Potters Bar, Stevenage, Watford and Hemel Hempstead.

For many smaller businesses, being close to customers, employees and suppliers is more important than occupying the newest building. A slightly older industrial unit in a convenient and well-connected location may be more useful than a modern building that is further away from the area the business serves.

This is particularly relevant for companies whose vehicles and employees need to travel throughout Hertfordshire, North London and the wider South East.

The building still has to work

Good road connections will help attract interest, but location cannot compensate for a building that does not work properly.

When considering an industrial property, I look beyond its size and headline rent. The practical details are just as important:

• Can vehicles enter, turn and load conveniently?
• Is there sufficient parking?
• Is the power supply suitable?
• Is the warehouse layout straightforward?
• Is there an appropriate amount of office space?
• Is the building secure and reasonably energy efficient?
• Is the surrounding estate well maintained?
• Could the unit suit a range of different businesses?

These matters can have a direct effect on how easily a property lets and how likely an occupier is to remain there.

Parking is a good example. It may appear to be a relatively minor detail when looking at an investment brochure, but it can become a significant problem for a business employing several people or operating a number of vehicles.

Flexibility is important

Industrial buildings frequently outlast the businesses occupying them. An owner therefore needs to consider not only whether the property suits the current tenant, but whether it will remain useful when that tenant eventually leaves.

I prefer straightforward properties that could appeal to several types of occupier. A sensible warehouse layout, suitable loading access and a practical balance between storage and office accommodation all help.

Highly specialised buildings may work extremely well for one particular company but can be much harder to relet without substantial alterations.

The condition of the property also matters. Roofs, cladding, services, drainage, external areas and energy performance can all create significant future costs. These items should be properly considered before an acquisition, rather than treated as matters to address later.

A headline yield does not tell the whole story

A property offering an attractive yield can look compelling, but the initial return is only one part of the investment decision.

If the tenant leaves, the owner may face a period without rental income while continuing to meet insurance, security, maintenance and business-rates costs. The property may also require refurbishment before it can be marketed again.

For that reason, I believe it is important to understand the local occupational market. How much competing space is available? How long are similar units taking to let? What types of businesses are looking in the area? Is the quoted rent supported by genuine evidence?

The tenant’s financial standing and lease terms are important, but so is the underlying building. A good tenant cannot turn a fundamentally poor property into a good long-term investment.

A more balanced market

Industrial occupiers now have more choice than they did during the exceptional market conditions following the pandemic. This should encourage landlords to concentrate on the quality, condition and presentation of their properties.

I do not see this as a negative development. A more balanced market should favour owners who understand their buildings, maintain them properly and respond sensibly to occupiers’ requirements.

There should continue to be demand for smaller industrial and warehouse units across Hertfordshire and the South East. Businesses will still need practical premises from which to store goods, manufacture products, provide services and reach their customers.

However, I believe the strongest properties will be those that offer more than a desirable postcode. They will combine good transport connections with workable loading, sufficient parking, appropriate services and the flexibility to accommodate different businesses over time.

These are the basic property fundamentals that guide how AMV Property Holdings manages its existing portfolio and considers future acquisition opportunities.

This article contains general market commentary and does not constitute investment, financial or professional advice.