What is vacancy risk in industrial real estate?
Vacancy risk is the chance that space in a property will be empty, and earn no rent, for longer than planned, multiplied by the income lost while it is. In industrial real estate it comes from three places: leases ending or breaking, tenants leaving early or failing, and how long it takes to find the next tenant. Scayled works on the third part. When a unit is vacant or likely to come back, it finds 250 to 350 businesses the building suits, names the person who signs at each and drafts an approach per business.
- What does vacancy risk mean?
- What causes vacancy risk in industrial property?
- How is vacancy risk measured?
- Why is industrial vacancy risk so lumpy?
- How do funds reduce vacancy risk?
- Where does Scayled fit with vacancy risk?
What does vacancy risk mean?
Vacancy risk is the expected loss from empty space: how likely a unit is to fall vacant, how long it would stay vacant, and what that period costs. It is an asset-level and portfolio-level measure, different from the market vacancy rate that brokers and data providers publish for a submarket.
The two are linked. A high market vacancy rate means more competing space and longer re-letting times, so the same lease expiry carries more risk in a loose market than in a tight one.
What causes vacancy risk in industrial property?
The scheduled causes are lease expiries and break dates. The unscheduled ones are tenant insolvency, a tenant closing or consolidating a site mid-lease, and surrender deals. Building factors add to both: low clear height, limited power, a shallow yard, or an energy rating below what occupiers or regulation require (in England and Wales, minimum energy efficiency standards restrict letting buildings with an EPC rating below E).
Location and size matter too. Large single-let buildings and specialised facilities have fewer possible occupiers, so they take longer to re-let than standard multi-let units in established estates.
How is vacancy risk measured?
Funds look at the lease expiry profile (the share of income ending in each of the next few years), WALE to expiry and to break, the concentration of income in the largest tenants, and the downtime assumed in the valuation model, usually set as months vacant in ARGUS Enterprise market leasing assumptions.
Market context comes from CoStar, Yardi Matrix in the US, and quarterly industrial research from agencies such as CBRE, JLL and Cushman & Wakefield. Tenant-level credit data from Creditsafe, Dun & Bradstreet, Experian or MSCI's Income Analytics service covers the risk of unplanned departures.
Why is industrial vacancy risk so lumpy?
Industrial income is often concentrated. A single tenant may occupy a whole building, so a departure takes that asset from fully let to empty in one step. A modest number of large leases can carry a large share of a fund's income.
That makes portfolio averages misleading. A 95 percent occupancy figure can hide one large unit about to come back, and the fund's exposure sits in that one expiry, not spread across the book.
How do funds reduce vacancy risk?
Before the event: renew early and regear leases with tenants worth keeping, keep buildings competitive with capital spend on power, yard, docks and energy performance, stagger expiries, and secure leases with guarantees and deposits.
When a unit is coming back: plan the re-let before the handback. Listing with an agent and on portals reaches businesses searching now; a direct approach to the businesses the building suits reaches those not searching yet, which is where many industrial lettings come from.
Where does Scayled fit with vacancy risk?
Scayled does not measure or forecast vacancy risk. It shortens the vacancy itself, the third source of risk above, by going to businesses before they start searching. For each unit it builds a list of 250 to 350 occupiers whose operation fits the space, leads with those showing dated signs of growth or a lease event, and gives the fund the person who decides and an email for each.
What shortens the vacancy is priced per unit as The Campaign: US$749 for the Full 250 to 350 businesses in about five working days, or from US$449 for the strongest 100 to 150 in about three. There is no subscription and no commission, and the approaches are written as the owner to sit alongside any appointed agent. Marketing a vacancy beyond the listing portals covers the other channels worth running at the same time.
Lease The Vacancy In-House, Before You Appoint An Agent.
The Campaign finds the 250 to 350 businesses the building suits, names the person who decides at each and writes every email, ready in about five days. One payment of US$749 per property, no commission and no subscription. A focused 100 to 150 from US$449.