Guides/How to assess an industrial property and its rental yield
How to assess an industrial property and its rental yield
A starting point for assessing an industrial property, its rental income, condition and potential yield
A headline rent or yield cannot tell you everything about an industrial property. Before making an investment decision, look at the income, the lease, the building and the costs that may affect future performance.
Start with the income.
Check the rent being received and compare it with the lease terms. Find out when the lease ends, whether there are break options, when rent reviews take place and who pays for repairs, insurance and service charges.

If the property is vacant, assess the likely market rent and the time and cost involved in finding an occupier. A quoted rent is not the same as income secured under a lease.
Review the building and site.
Consider the unit’s size, layout, loading access, power supply, yard space and condition. Think about whether the property suits a range of occupiers or depends on a particular use.
Allow for repairs, maintenance, compliance work and any improvements needed before or during a letting. Check the title, planning position, access rights and any restrictions that could affect how the property is used.
Understand the yield calculation.
A simple gross yield compares annual rent with the property’s purchase price. For example, annual rent of £50,000 on a purchase price of £1 million gives a gross yield of 5%.

That figure excludes costs such as purchase fees, repairs, void periods, insurance, and management. A net calculation can provide a fuller picture, but the result depends on which costs you include. RICS describes yield as the relationship between income and capital value and notes that valuation also relies on market evidence and assumptions.
Look beyond the percentage
Consider the tenant’s covenant, the lease length, the property’s condition, likely capital costs and how easily the asset could be let or sold. Compare the property with relevant market evidence and test how the numbers change if rent falls, costs rise, or the unit is empty.

This guide is an introduction, not a formal valuation or investment recommendation. North360 can discuss an industrial property and the questions to investigate before you proceed.