Industrial And Warehouse Mortgages
Commercial mortgage finance for industrial units, warehouses, trade counters and light industrial premises. Whether you are an owner-occupier buying your own trading premises or an investor purchasing a let property, we access fixed and variable rates from across the market, with loans starting from £250,000. No broker fees on most cases.
Industrial and warehouse properties are in strong demand. E-commerce growth, supply chain resilience and record-low vacancy rates have made this sector consistently attractive to lenders. We arrange mortgages for owner-occupiers, investment landlords and portfolio holders across England, Scotland and Wales.
What counts as industrial property for mortgage purposes
Lenders define industrial property broadly to include light industrial units, trade counters and distribution facilities, but are more selective about heavier uses. Properties we commonly arrange mortgages for include:
- Light industrial units (manufacturing, assembly, small-scale production)
- Warehouse and distribution centres
- Trade counters with storage and yard space
- Multi-let industrial estates and business parks
- Logistics hubs and parcel depots
- Motor repair workshops and vehicle sales yards
Lenders are typically cautious about heavy industrial uses with environmental risk, specialist manufacturing (with highly specific equipment and few alternative tenants), or very large logistics facilities (where tenant strength and lease length become critical). A Phase 1 environmental report is standard for all industrial mortgages; specialist contamination or licensing issues may require further assessment.
Why industrial properties perform well as mortgage security
Industrial and warehouse properties are highly favoured by lenders because they carry predictable demand and strong economic fundamentals. Key reasons include:
- Long-term leases: most industrial tenancies run 5 to 10 years (some longer), providing stable rental income and low re-letting risk
- Strong tenant covenants: occupiers include established logistics providers, manufacturers and retailers with reliable payment history
- Low maintenance: industrial buildings are simple structures with minimal service charges or structural risk
- Record-low vacancy: the UK industrial sector has held vacancy below 5% for several years. E-commerce growth, supply chain nearshoring and warehouse consolidation continue to drive demand
- Stable values: rental growth in logistics and distribution has tracked inflation; properties hold their value through market cycles
As a result, lenders are willing to offer competitive rates and higher LTV to borrowers with strong covenants and clear income profiles.
LTV, rates and terms explained
Loan to value (LTV)
Owner-occupier mortgages typically go up to 70% LTV. Investment mortgages typically go up to 65% LTV, though this depends on the strength of the tenant, lease length and lender appetite. DSCR (debt service coverage ratio) is assessed separately and will usually require a minimum of 1.25x, meaning annual rent or trading income must cover mortgage payments by at least 25%.
Interest rates
Indicative rates start from around 5.5% per annum for well-secured owner-occupier cases. Investment mortgages typically cost 0.25 to 0.75% more. Rates vary based on LTV, lease length, tenant strength, and whether you choose fixed or variable terms. All rates are subject to lender underwriting and may change.
Mortgage terms
Mortgages are typically available from 10 to 25 years. Shorter terms (10 to 15 years) suit owner-occupiers with strong cash flow. Longer terms (20 to 25 years) are more common for investment properties where rental yield forms part of the repayment capacity. Interest-only mortgages are available for investment cases where DSCR is sufficiently strong.
Broker fees
FD Commercial charges no broker fee on most commercial mortgages, including industrial and warehouse properties. A fee may apply only if we arrange additional specialist finance, such as bridging in parallel with a term mortgage.
Owner-occupier mortgages
An owner-occupier mortgage is for a business owner or owner-director buying premises that they intend to occupy and trade from. The mortgage is assessed on the business's trading income and cash flow, not on the property's rental yield.
Who qualifies
Limited companies, partnerships, sole traders and LLPs all qualify. Mortgage assessment is typically based on three years of accounts and recent management accounts. You must have a personal or business connection to the property.
What lenders assess
Lenders require DSCR showing that your business profit covers the mortgage and running costs by at least 1.25x. They also assess trading history and consistency, business sector and growth trajectory, balance sheet strength, personal guarantees from main shareholders or directors, and the physical condition and suitability of the property for the intended use.
Advantages
Owning your trading premises removes rent escalation risk and gives you security of tenure. Mortgage payments build equity in the property rather than paying a landlord. Mortgage interest is generally deductible as a business expense, subject to your accountant's advice on your specific structure.
Investment mortgages
An investment mortgage is for a landlord or investor buying an industrial property to let to a third-party tenant. The mortgage is assessed primarily on the tenant's rent and the property's rental yield, not on your personal income.
Who qualifies
You can be an individual investor, a limited company or a partnership. There is no minimum requirement to occupy the property. Most lenders prefer investors with evidence of letting experience and a track record of meeting mortgage payments on existing properties.
What lenders assess
Lenders require DSCR (typically 1.25x minimum), meaning the tenant's annual rent must cover your mortgage payments by at least 25%. They also assess tenant creditworthiness, lease length remaining (typically minimum 70 years), rent review pattern, strength of the lease terms, and whether the property is multi-let or single-let (multi-let is lower risk).
Advantages
Investment mortgages allow you to spread capital across multiple properties, creating a portfolio of rental income. Interest payments are generally deductible against rental income. Strong industrial tenants on long leases create predictable, low-risk cash flow. Rates are often competitive because lenders view industrial property as stable, income-producing security.
What lenders assess in detail
DSCR (Debt Service Coverage Ratio)
DSCR is the annual income (from business trading or tenant rent) divided by the annual mortgage repayment. Lenders typically require DSCR of at least 1.25x, meaning you need £1.25 of annual income to cover every £1 of mortgage payment. This buffer protects against falls in business profit or tenant default. A DSCR of 1.5x or higher will improve terms and rates.
Tenant covenant strength
For investment mortgages, lenders grade tenants as strong (listed plc, major logistics operator or household name), good (established local or regional business with three or more years trading), or moderate (newer or smaller business). Strong covenants attract lower rates; weak covenants will face restrictions or higher costs. For owner-occupier cases, lenders assess your business's financial strength in the same way.
Lease length
Most lenders require a minimum of 70 to 80 years remaining on a lease (important for multi-let freehold estates). Leases under 70 years may face lower LTV or higher cost. Owner-occupiers buying freehold properties have no lease constraint.
Planning use and environmental risk
Lenders verify the property's planning use class and carry out environmental searches. Properties in B2, B8 or E(g)(iii) classes are standard. Uses with environmental risk (previous industrial use, landfill, quarrying, waste) may require Phase 2 environmental assessment. Contamination without remediation will face lower LTV or decline.
Physical condition and structural suitability
Lenders instruct a valuation and may require a structural survey. Buildings in good condition with suitable yard space, loading docks and parking are preferred. Poor condition, limited parking or unsuitable layout for the intended use will reduce valuation and may trigger remedial conditions.
The application process
Initial conversation
We discuss your requirements, property type, intended use (owner-occupier or investment), loan amount and timescale. We then perform a rapid lender screening to identify which lenders best match your case.
Documentation and submission
We request accounts, bank statements, property details and supporting documents. For owner-occupiers, we require three years of business accounts and recent management accounts. For investors, we require tenancy documentation and, where available, audited accounts of the tenant. We then prepare a lender summary and submit your application.
Valuation and searches
The lender instructs a valuation (you pay the valuation fee, typically £500 to £1,500). Environmental, water and drainage searches are ordered. The lender reviews these reports and confirms whether to proceed or requires further information.
Mortgage offer
If underwriting is complete, the lender issues a formal mortgage offer. This includes the loan amount, interest rate, term, any conditions, and the date from which the offer is valid (typically six months).
Legal completion and drawdown
Your solicitor completes the purchase and requests funds drawdown from the lender. Funds are released once all conditions are met and the property is registered with the mortgage in first legal charge. Completion typically takes 8 to 12 weeks from initial application.
Worked examples
Owner-occupier: engineering manufacturer
A 15-year-old manufacturing company with £800,000 annual turnover and £120,000 annual profit buys its trading premises at £750,000. Three directors, equal shareholding.
Loan structure: 65% LTV, £487,500 mortgage over 15 years at 6.25% indicative. Annual mortgage payment approximately £37,000. DSCR: 3.2x against the 1.25x minimum. Strong case, likely to receive competitive terms. The company removes rent escalation risk, builds equity, and can offset mortgage interest against corporation tax.
Investment: rental warehouse
An investor purchases a 5,000 sq ft warehouse let to a logistics company on a 10-year lease at £60,000 per annum. Property valuation: £900,000.
Loan structure: 65% LTV, £585,000 mortgage over 20 years at 6.5% indicative. Annual mortgage payment approximately £43,500. DSCR: 1.38x, above the 1.25x minimum. Net annual cash flow: approximately £16,500 before maintenance and tax. Strong tenant covenant and remaining lease term reduce risk.
Frequently asked questions
Can I use a residential mortgage to buy an industrial property?
No. Residential mortgages are only available for owner-occupied homes. Industrial properties, warehouses and trade counters require a commercial mortgage regardless of whether you intend to occupy or let the property.
What planning use class do I need for an industrial mortgage?
Most lenders accept B2 (general industrial), B8 (storage and distribution) and E(g)(iii) (light industrial) use classes. Specialist uses such as heavy manufacturing, petro-chemical storage or licensed environmental risk may face restrictions or lower LTV. Confirm the use class with your local planning authority before making an offer.
Does environmental contamination affect my industrial mortgage?
Yes. Lenders require environmental searches as part of underwriting. If a property is on or near a contaminated land register, lenders may require a specialist Phase 2 environmental survey. Modern light industrial units are rarely affected, but older industrial estates or former manufacturing sites should be investigated early.
What tenant covenants do lenders assess for investment mortgages?
Lenders assess tenant creditworthiness, length of remaining lease term (minimum typically 70 years), whether the tenant is a listed company or strong SME, rental payment history, and whether the lease includes regular rent reviews. A strong tenant on a long lease will attract better rates and higher LTV than a unit with a weak covenant.
How long does completion take on an industrial mortgage?
Typical completion takes 8 to 12 weeks from application to funds release, depending on lender workload and whether searches, valuations and surveys raise any issues. Bridging finance is available if you need to complete more quickly and are awaiting a longer-term mortgage offer.
Do I need a commercial mortgage broker for an industrial property?
A broker is not required, but strongly recommended. Industrial mortgages have fewer lenders than residential mortgages and criteria vary significantly. FD Commercial charges no broker fees on most cases and has full access to market including lenders with specific appetite for industrial and warehouse assets.
We arrange industrial and warehouse mortgages from £250,000 across England, Scotland and Wales. No broker fees on most cases.
Call 03300 100315All rates and figures shown are indicative only and subject to lender assessment, credit profile, and market conditions. Rates may change without notice. Your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.