Shipping containers for commercial use: a new category of investment or just the latest fad?
Shipping containers might not be the most obvious choice of building material. However, over recent years, there has been a significant increase in the use of shipping containers forming the basis of a number of high-profile, commercial development schemes.
Back in 2012, food chain Wahaca opened the doors of its restaurant made of shipping containers on London's Southbank − whilst Hilton Hotel's new Bristol Airport offering is based on shipping container infrastructure.
Why shipping containers?
Forget the old days where containers were used for shipping and storage. Mainly used for commercial purposes at the moment, the containers can be likened to ready-made building blocks being acquired, converted and then used as spaces from which to run a business.
Because they are inexpensive and relatively small in size as single units, these shipping containers can be fitted-out offsite, therefore reducing costs. The containers also have the 'upcycling' appeal popular amongst consumers, providing the perfect setting for a forward-thinking business in 2018. Craft beer stores, bicycle manufacturers, clothing retailers, bakeries and offices have all taken residence in upcycled containers. Whilst the focus is on commercial spaces, shipping containers have been used in a number of residential schemes.
Whilst there are numerous benefits to jumping on the shipping container trend, how easy is it really to base a business in a shipping container, what are the potential pitfalls and where do you stand legally?
Before buying a container there are a number of questions to consider:
- Purpose: The first two questions to answer are: i. what is the shipping container(s) going to be used for and ii. where will the container(s) be sited? The answers to these two questions are the starting point to determine other important considerations, such as the need for access to certain services or the reliance on footfall.
- Finance: How will I fund the purchase or conversion? Can you borrow money to buy a shipping container? Are there any legal considerations re finance?
- Planning, Licences, Permits & Building Regulations: Do I need planning permission to site the container on land, convert it into a habitable space and to run a business from it? How do I buy a shipping container and what paperwork is needed? Do I need consents or licences to discharge waste or water? How do I make utility connections?
- Purchase: How do I align the funding I may receive from a third party or bank with obtaining the relevant consents and permissions to do what I want to do with the actual purchase of the containers?
- Logistics: Once I have purchased the container, how do I transport it to where it needs to be and install it?
- Management: You will also need to consider how the space will be used and by whom and how it will be managed on an ongoing basis.
Asset management and portfolio opportunities
Depending on what the permitted use of the container is, there is also the opportunity to invest in shipping containers, giving someone else permission to use it by granting a lease or licence.
Shipping container developments may provide a unique investment and occupation opportunity with potentially low overheads when compared to projects which often require large upfront capital investment to fund the construction of a building.
There are also opportunities and potential challenges for landlords, including financing/mortgage, insurance, repair, contracts, service rates charges etc.
Are shipping containers here to stay?
There is no doubt that the use of shipping containers has caught the attention of many of the UK's major developers, both in the UK and internationally. Time will tell whether the potential advantages are realised over time and this style of modular building becomes the norm. However, with any new, less traditional and less tried and tested style of development, there will inevitably be a number of areas that must be carefully considered before embarking on a project. Whilst there are a number of benefits, a well-planned and informed approach is vital to the success of any shipping container scheme or investment.
For more information, please contact Joanna Damerell, Partner in the Real Estate team.