PropList Blog
Small spaces in big demand

In the age of the internet start-up business, the storage provider is king. Whether it’s a once-small stationery provider whose reach has gone national, a cupcake company formerly operating out of their kitchen, or an import and re-sell venture, there will come a time where, if ambitious enough, a garage won’t suffice, but a warehouse is overkill. With this requirement spiking only in the last few years, does the commercial market reflect the call for a happy medium sized space?

In short, no.

Historically, the model has always been to maximise the space available, with bigger being better. At around 8% yield, the return on investment for a 25,000 sq ft warehouse measures far greater than that of smaller spaces (under 10,000 sq ft is around 5% yield). It can be let to a single occupier, removing any worry of subsections or unpopular areas of space staying on the market for an extended period of time. From an investor’s point of view, spaces under 7,500 sq ft haven’t been built for good reason.

At PropList, each agent liaises directly with the business development team, and all stock is monitored. With the exception of ultra-premium high street locations, we see the speed at which small commercial space is continuing to move from the site. We also take all enquiry calls ourselves, so no request for sites of this size are missed. With interest rising in an area where there is very-limited stock in existence, and no plans for a roll-out of reduced profit builds, here are some solutions which could fill the void.

The high street

To visualise the size of property in demand, it starts at the size of an average Greggs bakery, and maximises at around the size of your average Italian chain restaurant. As the analogy suggests, the place where these properties are found in abundance is on the local high street. The soaring business rates and inflated rents have driven household names away from the premium spots in shopping centres, but secondary locations in less prominent town centres are becoming far more affordable. These sites fall into the bracket where a start-up business can thrive, without needing a drastic fit-out; and with a readymade footfall in place, marketing is less vital. For those who aren’t looking for a retail space, most former stores have ample storage at appropriate temperatures, and security is amplified through town centre CCTV and pedestrian presence. The former shop front can be dressed to the leaseholder’s requirements, with potential for advertising rates to be charged, should the location allow.

Whilst the aforementioned visitors come with their pros, they also hinder any business that relies on receiving or making a high volume of deliveries. Access to many high streets, even in smaller towns is restricted during business hours, and parking is sparse and almost always at a cost.

Suitable for: semi-established retail, infrequently accessed storage, food and beverage

Not suitable for: bespoke high-cost retail, accessible storage, delivery and logistics, office space, workshops

Residential-commercial hybrid

With the previous solution being quite readily available, but not suitable en masse, the idea of building residential properties with commercial structures attached is perfectly suited to wide array of companies, but alas, currently in short supply and yet it represents one of the fastest selling sectors on PropList. The idea is simple: a family home with a detached office block/mini-warehouse/workshop. As a freehold, the land can be designed to suit your needs, from a small four desk office, to a wholesale or distribution outfit. With the space being separate from the house, it allows the occupier to separate home-life and work-life more easily, without needing to commute. Spaces like this are currently available, and many more are in plans to built across the country.

This solution isn’t without its drawbacks. Your purchase-pool is limited, and in some cases there may not be any available at all in your required location – an oversight local developers may be looking to rectify in the coming years. Some have also suggested the idea marries the occupier to their job and their location – they must remain in the same job or the same residence until they are willing to give one of the two up. And should delivery vans be pulling into a quaint street every hour, the local community may not welcome these developments readily.

Suitable for: all storage, non-footfall reliant retail, short and long term office space, workshops, delivery and logistics, food and beverage

Not suitable for: footfall reliant retail

The divisible serviced warehouse

Of the three solutions, this is currently still a pipedream in the UK market. But the success currently seen in Germany should inspire developers to research how they can replicate serviced warehouses, which embrace technology and cater to the needs of each occupier. Prospective tenants state how much space is needed, and through moveable cage-style walls, any size can be created, from a few desks to industrial storage. The serviced element is represented by the extras – high speed Wi-Fi is fitted throughout, each “pod” can be delivered to and from with slots available to be booked should no one be available, and forklifts and other essentials can be provided at hourly and day rates. Parking is plentiful and security is heightened.

The shortcomings of a warehouse do remain, however. Climate control cannot be installed into each individual area due to the moving nature of the spaces, meaning food and beverage and some kinds of storage are not suitable. With so many potential industries applicable to rent space, landlords will need to consider multiple licenses, often having to apply for certain clearances when enquiries come in. It is also a very large co-working space, which comes with its own disadvantages.

Suitable for: majority of storage, office space, delivery and logistics, workshops

Not suitable for: retail, food and beverage

Small spaces have been, and will continue to be, one of the most requested listings on PropList. With the high street solution not being suited to all needs, should investors are prepared to take a risk on the latter two options, they may get one-up on the competition and emerge as market leaders in a growing property subset.