Refinancing industrial and logistics property

Can you remortgage a commercial property like an industrial unit?

Yes. A commercial remortgage works on the same principle as a residential one, a new loan replaces the old, but the underwriting is entirely different. There is no standard variable rate to fall onto and no product transfer culture: when a commercial facility matures or its fixed period ends, the terms on the table are whatever the market offers that borrower, that asset and that income at that moment. Industrial property is currently among the easier asset classes to place because lenders like the breadth of occupier demand behind it, but appetite varies sharply between lenders and moves over time. A high street bank, a challenger bank and a specialist lender can return three genuinely different answers on the same estate in the same week, on rate, on leverage and on how they treat short leases, which is exactly why the market needs testing rather than assuming.

Eligibility rests on the income and the asset rather than a checklist. A lender wants clean title, a lettable unit with a compliant EPC, a tenancy schedule it can verify, and a borrower whose wider position stands scrutiny. Vacant or part-vacant units can still be refinanced, usually at lower leverage or on a short-term basis until letting completes, and owner-occupied units are refinanced on the trading strength of the business as well as the property. Adverse credit narrows the field but rarely closes it; specialist lenders will look at a strong asset behind an imperfect borrower, priced accordingly. The practical advice in every case is to start six months or more before maturity, because a borrower negotiating with time in hand gets materially better terms than one whose loan expires next month.

How do lenders assess an industrial refinance?

The loan is sized on two tests run together. Loan to value caps the debt against the valuation, typically at around 65 to 70 percent for industrial investment property. Interest cover sizes the debt against the net rent: the lender wants the rental income, after non-recoverable costs, to exceed the interest by a clear margin, and where rents are modest relative to value it is this test, not the LTV, that sets the ceiling. Fixed rates can help here, because a known interest line makes the cover calculation cleaner, and the choice between interest-only and repayment structures changes the affordability test again. Industrial property's relatively high yields mean the cover test bites less often than it does on offices or retail, which is one reason the sector gears efficiently.

Around those numbers sits the qualitative underwrite. Who are the tenants, and what would happen if the largest one left? How does the passing rent compare with the ERV, and what is the evidence for re-letting at that level? What is the WAULT, and is the income reversionary or over-rented? Is the unit genuinely usable, with the eaves, yard, loading and power that occupiers in that catchment need, and does the use class, whether B2, B8 or E(g)(iii), match what the occupiers actually do? On multi-let estates the lender also wants the service charge arithmetic to work, because shortfalls that leak into the landlord's income reduce the net rent the whole loan is sized on. A refinance pack that answers these questions before they are asked is the difference between a smooth credit approval and a months-long correspondence. We build that pack for every case.

How much equity can you release from an industrial investment?

The arithmetic is simple: the new loan, sized at up to around 65 to 70 percent of today's value and within the interest cover limit, minus the debt being repaid, is the capital released. The interesting part on industrial property is how often today's value has moved ahead of the old loan. Multi-let estates carry short leases that renew frequently, so rental growth feeds into passing income quickly, and an estate re-geared over three or four years can support materially more debt than the facility that bought it. Even where leases have not yet renewed, a documented reversion, passing rents demonstrably below ERV with letting evidence to prove it, persuades some lenders to give partial credit for the income that is coming, and knowing which lenders those are is much of the placement decision.

What the released capital does next is part of the credit story. Lenders are happiest when the equity recycles into more property, the deposit on the next estate, the refurbishment of vacant units, or the buyout of a partner, because the borrower's position strengthens rather than leaks. Raising capital for purposes outside property is possible too, though the field of willing lenders narrows and the pricing reflects it. We present the plan alongside the numbers in every case. Where a holding mixes light industrial stock with larger distribution warehouses and big-box logistics assets, we arrange the funding across the whole umbrella and structure the boundaries between facilities deliberately, so the entire portfolio is financed coherently rather than asset by asset.

Can you refinance out of bridging or development finance?

Yes, and on industrial property it is one of the most common refinances we arrange. Bridging and development debt are transitional by design: expensive, short and built to be repaid by something cheaper. Once the trigger event has happened, the refurbishment finished, the units let, the planning secured, the term refinance converts a double-digit holding cost into long-term debt from around 6 percent. The discipline is to refinance the moment the asset qualifies, because every month on bridging beyond that point is margin burned for no benefit. The term lender's requirements should shape the project itself: leases signed on institutional terms, an EPC certificate in place at completion, and the tenancy paperwork tidy from day one all shorten the path off the expensive money.

Timing the exit from development finance involves a judgement call. A newly completed scheme that is still letting up will not yet support full term leverage, because the interest cover test needs income that is not all there yet. The options are a development exit loan, a cheaper short-term facility that buys time while the tenancy schedule fills, or a term loan at conservative leverage now with a capital raise later once the income matures. We model both routes against the letting programme and the cost of each, and we start the work before practical completion so there is no expensive gap between facilities.

What are the steps, and how long does refinancing take?

A typical industrial refinance runs in four stages. First, the review: the current facility, any early repayment charges, the tenancy schedule and the objective, followed by a market test that brings back indicative terms from the lenders whose appetite fits the asset. Second, the application: a decision in principle, then a full submission with the tenancy schedule, leases, accounts and borrower information. Third, diligence: the lender instructs a valuation of the property and its income, and the solicitors work through title, leases and any occupational points. Fourth, completion: the new facility draws, repays the old one, and any released capital lands.

End to end, a clean case commonly completes in around 8 to 12 weeks, with valuation and legals the long poles. The avoidable delays are nearly always documentary: missing lease documents, unresolved title points, an EPC that lapsed, or a tenancy schedule that does not match the leases. We sweep for these at the start rather than letting the lender's solicitors find them at week nine, and on multi-let estates, where a dozen small leases each carry their own paperwork, that sweep alone can save a month. Where a maturity deadline is genuinely tight, a short bridge can hold the position, but the better answer is starting early enough not to need one.