Industrial shed construction for owner-occupier

The situation

The following is an anonymised composite reflecting a recurring pattern, not a specific settled deal. A logistics and warehousing business, currently leasing its premises, decides to purchase land and build its own industrial shed, tailored to its specific operational needs, rather than continuing to pay rent on a facility it does not control.

Why it's hard

An owner-occupier construction project is assessed on the business's own trading financials as the primary income source repaying the facility, rather than external tenant income, which means the lender needs confidence in the business's ongoing trading performance across the construction period and well beyond it. The business must also continue funding its current lease obligations until the new shed is ready, adding a period of double occupancy cost to plan for.

How it can be structured

A construction facility secured by a first mortgage over the site, assessed primarily against the business's trading financials and its ability to service the loan once operational from the new premises, is the standard structure; the exit is ordinary loan servicing from the business's ongoing trading income once construction completes and it relocates. Because the business is the ultimate occupant rather than an external tenant, some lenders will also factor in the savings from no longer paying external rent as part of the serviceability assessment, effectively net of the new facility's own repayments. Timing the transition carefully — negotiating a flexible exit from the current lease, or a short overlap period — reduces the double occupancy cost that otherwise falls on the business during the build.

Lenders will typically ask for a clear picture of the business's plans for the existing leased premises during the build, whether the lease will run its full term, be assigned to another tenant, or be exited early with the landlord's agreement, since the answer affects both the double occupancy cost and the overall serviceability calculation through the construction period. Where the new shed is significantly larger than the business's current operational footprint, with the intention of leasing part of it to another occupier or growing into the additional space over time, presenting this plan clearly helps the lender assess the facility against a realistic future use rather than treating any unused space as simply unaccounted for. Some businesses structure the facility with an interest-only period through construction and the initial relocation phase, moving to principal and interest repayments once trading has stabilised in the new premises, smoothing the cash flow impact of the transition itself. A fixed-price building contract, rather than a cost-plus arrangement, is generally preferred by lenders in this scenario, since it gives both the business and the financier more certainty over the project's total cost from the outset.

What it typically costs

Pricing reflects the business's trading strength and the project's construction risk, quoted on enquiry once a lender has reviewed the business's financials and the build feasibility. Costs include standard construction finance fees, quantity surveyor verification through the build, and typical commercial property lending charges.

Timeline

1. Same day — scoping call confirming the site, shed design, budget and current lease position.
2. 5–10 business days — feasibility and document collection, including business financials and build contract.
3. 3–5 business days — lender matching and submission.
4. 10–20 business days — credit approval and offer.
5. 5–10 business days — documentation and first drawdown.

Questions we'd ask you

1. What does your business's trading history and current serviceability look like?
2. What is the total build cost, and do you have a fixed-price contract with a builder?
3. What is your current lease's remaining term, and is there flexibility to exit early?
4. Will the new premises be used solely by your own business, or partly leased to others?
5. What deposit or equity are you contributing toward the land and construction costs?

Related

Construction finance · Commercial property loans · Business owners · Serviceability