Big-box and distribution warehouse finance

How much can you borrow against a big-box distribution warehouse?

Borrowing on a let big-box distribution warehouse is driven by the income the building produces and the loan to value (LTV) a lender will support against it. For a stabilised single-let unit with a long lease in place, we typically arrange a commercial mortgage up to around 70 percent LTV, which on a 100,000 sq ft and above shed valued in the tens of millions still represents a large advance per square foot.

The exact amount turns on the tenant covenant, the unexpired lease term and how the passing rent compares with open market levels. A strong national occupier on a long lease supports the top of the range, while a short term or a weaker covenant pulls the loan to value back. We size the facility so it leaves comfortable headroom on the rental income covering interest, which lenders test closely on a single-let asset where one tenant carries the whole rent roll.

Beyond the income, lenders also look at the lot size and the depth of the buyer market. A prime big-box shed at the larger end, valued in the tens of millions, draws senior banks, insurers and debt funds, which keeps pricing competitive and the loan to value firm. We match the deal to the lenders most active at that lot size so the commercial mortgage is sized on a realistic read of both the income and the value.

What deposit and LTV apply to a single-let shed?

On a let big-box industrial unit most lenders advance up to around 70 percent loan to value, so the working assumption is a deposit of about 30 percent of value. A prime building with deep yards, high eaves and a long lease to a logistics operator or national retailer can reach the top of that band, while a unit with a lease event approaching or a softer location sits lower.

Development is sized differently. New big-box schemes are funded against cost rather than value, usually up to around 65 percent loan to cost, with the developer funding the balance through equity and any land value already held. We map the deposit or equity requirement at the outset so clients know what cash is needed before they commit to a purchase or a build.

What rates and terms can you expect on a big-box mortgage?

Pricing on a big-box distribution warehouse reflects the simplicity and liquidity of single-let logistics income. Investment commercial mortgages on prime stock with a strong covenant tend to price keenly against the wider commercial market, with the rate set off the covenant, the unexpired term and the loan to value. Secondary stock or shorter leases carry a margin premium to reflect the reletting risk.

Investment terms commonly run five to ten years, often with the option to fix the rate for certainty of cost over the hold. Development facilities are shorter and roll for the build and letting period before clients move onto a longer term commercial mortgage. We present the income and covenant in the way lenders underwrite it so the rate and term offered reflect the real strength of the asset.

Amortisation is a further lever. On a long lease to a strong covenant, some lenders will offer interest-only or low amortisation, which keeps the cash cost down over the hold, while a shorter lease or weaker tenant tends to come with more amortisation to reduce the loan to value over time. We weigh the rate, the term and the amortisation together so the structure suits how long the investor intends to hold the warehouse.

What do lenders look for in a big-box deal?

Lenders concentrate on the single tenant because that occupier carries the entire income. They weigh the covenant strength, the unexpired lease term, any break clauses and how the passing rent sits against open market levels. The reletting story matters just as much, so they assess the residual specification of the warehouse, its eaves height, yard depth and power supply, since these decide how readily the unit would re-let to another logistics occupier if it fell vacant.

Location on the motorway and trunk-road network is central, as depth of occupier demand in the local catchment underpins both the rental income and the exit. We assemble the covenant, lease and building evidence so the lender can size the loan to value confidently against a clear view of the risk at lease events.

Liquidity is the backstop lenders rely on. Big-box distribution stock trades readily because the single-let income is simple, which is why senior banks, insurers and debt funds all lend against it. Vacancy sat near 7.5 percent on the Knight Frank 50,000 sq ft and above measure, above the 4.6 percent ten-year average, so lenders also gauge how the local catchment is absorbing space when they judge how quickly a vacant unit would re-let.

Can you refinance or remortgage a big-box distribution warehouse?

Yes. We refinance let big-box sheds onto a new investment commercial mortgage or term loan, commonly to release equity created by rental growth, to fix a rate for certainty over the hold, or to replace a maturing facility. The loan to value is reset against the current rent and value, so a shed where the rent has grown or the lease has been re-geared can support a larger advance than at the original purchase.

Timing the refinance matters on a single-let asset, because the unexpired lease term drives both the rate and the loan to value a lender will offer. A remortgage shortly after a lease re-gear, when the unexpired term is long, generally secures keener pricing than one taken with a lease event approaching. Where a unit is heading toward vacancy we arrange bridging to buy time to re-let, then move the client onto a fresh term commercial mortgage once income is back in place.

Prime distribution yields held at 5.00 to 5.25 percent in December 2025 per Knight Frank, with secondary around 6.00 percent, which frames the value a refinance is sized against. We present the income, the covenant and the unexpired term so the new facility reflects the real strength of the asset at the point of refinance.