Warehouse, storage and logistics mortgages

A warehouse mortgage is a commercial mortgage used to buy or refinance a warehouse, distribution unit, trade counter or storage building. It is secured on the property and repaid over an agreed term. In the UK it is business lending, not the short-term warehouse lines that some lenders use to fund other mortgages.

The same approach covers small storage units, mid-box distribution warehouses and larger logistics buildings. Lenders treat warehouses as industrial property and look at how easily the building could be let or sold if the borrower or tenant left.

Lenders value a warehouse on its location, road access, eaves height, loading doors, yard space and condition. Buildings close to main road networks, with good access for heavy goods vehicles, are usually easier to finance. The lender's valuer also checks the use class, the lease where there is a tenant, and any environmental risk.

For owner-occupiers, the business's trading accounts and existing debt decide affordability. For investors, the rent, lease length and tenant strength matter most, and lenders test that the rent covers the interest by their own margin.

Cold stores, self-storage centres, freight terminals and high-bay warehouses are specialist buildings. Fewer lenders finance them, and those that do often lend at a lower loan-to-value, because the fit-out is expensive and the building may suit fewer occupiers. Self-storage is usually assessed on the trading income of the storage business itself.

Retail warehouses, used for bulky goods or trade counters, sit between industrial and retail lending. How lenders treat shops and retail premises is covered by the retail section, which helps when a unit has a retail use.

Investors buying a let warehouse are assessed on the lease and the tenant. A long lease to a strong tenant usually supports the most borrowing. Short leases, break clauses, or a multi-let estate with vacancies reduce the loan or lead to more conservative terms. Lenders also look at the investor's experience with commercial property.

Lenders also look at the unit's position on the estate, the state of shared roads and services, and who pays for repairs under the lease. A full repairing and insuring lease, where the tenant pays for repairs and insurance, is usually viewed more favourably than one that leaves those costs with the landlord.

Rent reviews and service charge arrangements are part of the assessment. Commercial investment lending across all property types, including how lenders test rent against interest, is covered in the commercial mortgages section, which sets out the wider market.

Warehouse mortgages differ on loan-to-value, term, pricing, fees and how flexibly lenders treat specialist buildings or short leases. Banks, challenger banks and specialist lenders all lend on warehouses. Comparing deals on the total cost over the term, including arrangement, valuation and legal fees, gives the fairest view.

Asking each lender for the same information, such as the maximum loan, the term, the fees and any conditions in the offer, makes the comparison easier. Conditions can include minimum rent cover, a cap on the loan-to-value during the term, or a requirement to keep the building insured and in good repair.

A broker who arranges industrial and logistics lending can say which lenders accept a particular building and tenant. The industrial mortgage brokers page lists firms that arrange this kind of finance.