"As environmental regulations tighten and sustainability becomes a business imperative, many owners are choosing to invest in their own properties to implement green technologies and energy-efficient systems"
- Tom Jansons - Jansons Property
For the first time in a long time we are witnessing a steady rise in demand from small business owners, particularly those with manufacturing and logistics companies, seeking to purchase their own commercial space. This is a real turnaround for the books, as for the past two decades, many people have preferred to lease their commercial space.
Arguably, leasing still remains an attractive proposition for companies looking to scale quickly and for those who need room to grow in the near future. However, what can’t be ignored in the South East is the steady increase in demand for small business unit ownership.
There are several factors at play here. Commercial rents are high at the moment, especially when we contrast this to historic levels, and whilst some businesses are able to manage these higher rents, others are looking for an alternative. In certain areas of the UK, such as the South East of England, rental figures are being quoted at a new high of £25 per square foot for commercial leasing. This has created a ‘tipping point’ for commercial rents in select parts of the country and has turned up the pressure on demand for small business units in particular.
Competition for space
We also have to consider that in the South East, there is also strong competition for available land and sites to be earmarked for residential development due to the region's close proximity to London, transport links, infrastructure, and employment opportunities. This has had a significant impact on the amount of actual available space for commercial usage and development.
There is now a substantial pent-up demand for small business units to be available for purchase, yet the market faces a critical supply shortage. This imbalance creates a compelling opportunity for property investors and developers. To help satisfy this demand, we are, for example, implementing a strategy of buying sites to build out small multi-unit schemes across the South East. These will be purpose-built units for the freehold market designed with owner-occupiers in mind.
However, at the moment there’s a real scarcity of space and freehold opportunities, and what is available for small businesses are older, out-of-date units. These older units typically require a great deal of capital expenditure from the buyer to make them fit for purpose let alone net zero compliant. Knight Frank’s 2025 Future Gazing Report also highlights the ‘evolving UK manufacturing landscape’ and the ‘future growth prospects for the sector’, including the ‘rising demand for bespoke, high specification facilities in strategic locations.’ The South East is one such location.
Furthermore, as environmental regulations tighten and sustainability becomes a business imperative, many owners are choosing to invest in their own properties to implement green technologies and energy-efficient systems. This not only reduces operational costs in the long run but also aligns with growing consumer expectations for environmentally responsible business practices. With the government's commitment to achieving net-zero targets, businesses that own their premises have greater autonomy to implement sustainable solutions that will ultimately future-proof their operations against upcoming regulatory changes and rising energy costs.
Favourable commercial lending terms
In a post-pandemic Britain, we’re now seeing the return of favourable commercial lending terms for small business owners. Commercial property investments usually come with greater financing options and loan terms compared to residential mortgages. Competitive interest rates and flexible repayment terms provide a springboard for small business owners to leverage. It’s therefore likely that this is also adding to the demand for small business units.
While the initial capital outlay is undoubtedly higher, ownership creates an appreciating asset on the balance sheet and provides a hedge against future market volatility. This is particularly relevant in the current economic climate where inflation concerns loom large. Business owners are increasingly recognising that mortgage payments directed toward ownership build equity over time, rather than simply covering occupancy costs with no long-term return. Plus, ownership may afford businesses greater control over their space, including the freedom to customise, renovate, and adapt their facilities to meet specific operational requirements without landlord restrictions or lease renegotiations.
As the desire and therefore demand for small business unit ownership continues to gain momentum across Berkshire, Buckinghamshire, Oxfordshire, Sussex, Surrey, and beyond, we're likely witnessing not just a temporary shift but a fundamental re-evaluation of how some small businesses approach their physical presence in the marketplace.
