Industrial leasing

Headline rent is the least useful number

An industrial letting can be compared on rent per square foot, and that comparison will mislead more often than it helps. What determines the return is the quality of the covenant, the length of the term, the incentives given to achieve it, and the cost of the space standing empty between tenants.

A slightly lower rent to a tenant who will still be trading in ten years is usually the better asset. That is a judgement about duration, which is the same judgement the group applies across its other four platforms.

What we underwrite

• Covenant strength. Whether the tenant can pay through a downturn, not only today.
• Term and break structure. Where the risk actually sits in the lease.
• Incentives. Rent-free and contribution costs assessed against the effective rent, not the headline.
• Re-letting cost. How specific the fit-out is, and what it would take to let again.

Occupier fit comes first

Industrial requirements are specific in ways that offices are not: eaves height, floor loading, yard depth, power supply, access hours. A tenant placed in space that nearly fits will leave at the first break, and the void that follows costs more than the rent difference ever earned.

We would rather establish the operational requirement properly and decline a letting than fill space quickly.

Held, not traded

The portfolio is held for income across a full cycle rather than assembled for disposal. That shapes the leasing approach: we are the party living with the consequences of a short-term letting decision, so we take fewer of them. It also aligns with how the group manages the assets once let.