Looking for a bigger place for your business can be overwhelming, especially if you have no idea about the industrial property market. The first step in moving your business to a new location is identifying the type of industrial property that can provide for your business needs for expansion and strategy.
There are several shifts in the UK commercial and industrial market since 2020 due to the growing demand from the logistics sector and the changes in the Town and Country Planning use classes last September 2020. As you transition into a new industrial space, it pays to be updated on the recent changes in regulations to put your business in a competitive position in the market.
Professional chartered surveyors in London like Phoenix & Partners aim to guide industrial businesses to acquire the right type of industrial property where they can maximize the space at a reasonable cost.
In this post, we will discuss the different types of industrial property, what changed in the use classes, and how you can save on your rent by outsmarting the commercial property regulations.
Different industrial properties in the UK
Most industrial properties in the UK fall in class B in the old use class structure while they are under class B and class E in the amended use class. (We will explain the change in use class later in this post.) These properties include:
Class B2 – General Industrial
The general Industrial use applies to the industrial properties ranging from light manufacturing and studios to heavy manufacturing industries.
1. Light manufacturing properties
The businesses that occupy these properties are customer-focused and handle minimal equipment and primarily use the space to assemble, pack, or treat their products. The properties under this category can be within a residential area. Common examples of industries that use light manufacturing properties are bottling, food packing, and furniture production.
2. Research and development properties
Formerly under B1b, R & D properties are now under class E. They usually house Industries under biotechnology, digital production, and locomotive research. The design of the properties under this category usually comes in black canvass to allow tenants to modify the place based on their business processes.
3. Heavy manufacturing properties
These are large-scale industrial spaces that house heavy manufacturing equipment. Industries that rent these properties are in the line of metal fabrication, chemical production, and other companies that provide products to other manufacturers.
Class B8 – Storage & Distribution
1. Wholesale warehouses
With the continuous growth of online retail, warehouse properties are now leading in the letting market. Most online businesses acquire warehouses since they are cheaper than extending a customer-facing retail space. They can also use the location of the warehouse to their advantage by making their products logistically closer to their target market.
2. Distribution centres
Industrial properties intended as distribution centres are strategically located near road links, ports, and airports to ensure fast delivery of goods to consumers. Distribution centres have more advanced processes than a typical warehouse such as:
- They have a forecast on what goods are needed to be delivered and deliver the goods in a shorter timeframe. The goods are no longer considered stock since they will soon be distributed to customers.
- Distribution centres also handle other services like product exchange, cross-docking, and packaging services.
3. Storage facilities
Storage facilities are specialized properties or buildings that store products. Some industries are using the space to turn it into a self-storage business where their customers can store their belongings and pay a monthly or yearly rent.
Industrial properties under the planning use classes
In 2020, an order from the government changed the long-time regulation on the use class classification of properties. Before September 2020, industrial buildings are under class B. In the new use class amendment, classes A to D are removed and three new classes were introduced.
The goal of the amendment of the use classes is to create mixed-use facilities to adjust to the changes in the retail scene. Here is the comparative visualization of the differences between the old and new use classes.
- All subclasses in class A consisting of shops and retail stores are now under class E – Commercial, Business, and Service except A1, A4, and A5
- Class A1 consists of shops no more than 280 sqm. and 1 kilometre away from the next shop selling essential goods is now under class F.2
- Class A4 – pub or drinking establishment and A5 – takeaway establishments are now sui generis
- Class B1 (Industrial uses) and all its subclasses (B1a, B1b, B1c) now belong to class E. B2 and B8 remain the same
- Class C – residential use is still the same
- Class D (non-residential institutions, assembly, and leisure use) and its subclasses are distributed to different classes:
- D1 which includes clinics, health centres, creches, day nurseries, day centres are now in class E
- D1 consisting of schools, non-residential education, museums, places of worship, and law courts is now under the new class F.1 – learning and non-residential institutions
- D2 consisting of cinemas, concert halls, bingo halls, and dance halls is now under Sui generis. Sui generis means a class of their own and does qualify for any use class.
- D2 consisting of gymnasiums and indoor recreational centres (without motorised vehicles and firearms use) is now under Class E – Commercial, Business, and Service
- D2 consisting of community meeting places or halls, indoor/outdoor swimming baths, skating rinks, and recreational places without the use of firearms and vehicles is now under class F.2
- Special Industrial Group A to E is still in the same use class because class B2 was not amended. These classes include:
- B3 or Special industrial group A: Industries handling substances under the Alkali, etc. Works Regulation Act 1906
- B4 or Special industrial group B: Metal production industries
- B5 or Special industrial group C: Chemical production industries
- B6 or Special industrial group D: Hazardous industries handling oils, acids, enamel, rubber, naphthols, bitumen, and other dangerous chemicals
- B7 or Special industrial group E: Production of animal products
New use class for real estate properties in the UK
In the new use class scheme effective from September 2020 to the present, class A to D has been deleted and three new classes were added which include:
- Class E or Commercial, business, and service cover any business or service that is appropriate to provide locally. It includes:
- Financial/professional services
- Indoor sports, gymnasiums, and recreational centres
- Medical clinics, health centres, nurseries, and daycare centres
- Industrial facilities applicable in a residential setting
- Research and development facilities.
- Class F.1 or Learning and non-residential institutions cover non-residential educational uses, schools, art galleries, libraries, public halls, places of worship, or law courts.
- Class F.2 or Local community includes two classes from the old use class including:
- Essential goods shops that have no more than 280 sqm. space and 1 kilometre away from the next shop
- Community halls
- Outdoor sports
- Swimming pools
- Skating rinks
- Newly added Sui Generis include pub or drinking establishments, takeaway, cinemas, concert halls, bingo halls, and dance halls.
How will the change in use class affect industrial properties
There are pros and cons to the amendment of the use class. class E is now covering several types of properties which makes it easier for you to change class from being an office to a retail space. You may also make a single into a mix-use model where you can house several business entities under class E.
The disadvantage of the use class amendment can only occur if you wish to turn a class E property into other classes. The impact of the amendment on business decisions may vary for every business. To know more about the best strategy for renting an industrial space, consult a chartered surveyor today and be guided on your next steps.
Industrial Property Frequently Asked Questions (FAQs)
What are examples of industrial property?
What are the types of industrial property?
– Flex offices
– Cold storage
– Data centres
– Research & Development facilities
– Warehouse or distribution buildings
– Truck terminals
In the UK, there is a useful class that classifies the category of every property. In the 2020 amendment of the use class, industrial properties can be found in the newly created class which is class E and class B. Some traditional industrial places are considered under the commercial, business, and service (class E) because they can co-exist in residential areas and town centres.