Multi-let industrial estates are an emerging market in real estate, but little is known about the key value drivers behind what makes these diverse estates so economically attractive. BCU researchers and property asset managers Place Partnership investigate the key factors that drive multi-let industrial estates.
Multi-let industrial (MLI) estates are an emerging £15 billion UK real estate asset class that can offer attractive returns, a diversified income base, constrained supply and extensive management opportunities to add value within an operational platform. In highlighting MLI property opportunities, current research reports predominantly look at market coverage. Looking behind the figures, this exploratory research can show the key value drivers of MLI properties.
Knowing what characteristics of MLI estates influence their values can improve the investment decision-making and subsequently provide better insight into this emerging asset class. This can be achieved by examining and modelling MLI performance and determinant characteristics.
To understand more about MLI properties, this study utilises a hedonic pricing model to quantify property values as a function of defined variables. The dataset used for this research is a sample portfolio of 26 multi-let industrial properties. The dataset was analysed alongside eleven physical, financial and locational factors.
Interestingly, the hedonic pricing model results showed that only four characteristics are value-affecting across the selected properties, namely:
- Granularity of the property income
- Distance from the nearest motorway
- Distance to the nearest town centre and gross internal floor area.
A chi–test confirmed that there was no significant difference between the modelled values and the supplied property valuations.This preliminary study offers valuable insight into MLI property market drivers and could easily form a simple decision-making tool to examine potential MLI opportunities in this developing real estate asset class.