"By providing specialist finance of up to £10 million over 24 months, we are enabling developers to deliver the high-quality units that modern businesses need to operate, grow and scale"
- Neal Moy - Paragon Bank
Paragon Development Finance has launched a specialist light industrial finance product to support experienced developers building small-scale industrial units across the UK property market.
The lender, part of Paragon Bank, is targeting schemes delivering units of 5,000 sq ft or less, with funding of up to £10m available over terms of up to 24 months. The move reflects sustained demand for flexible industrial space, particularly among SMEs, and highlights growing opportunities for developers focused on smaller assets.
Demand for light industrial space continues to outpace supply, with developers under pressure to deliver modern, well-located units suited to a changing occupier base.
Demand for small industrial units remains strong
Occupational demand for industrial space reached 37.4 million sq ft in 2025, marking the highest level since 2022 and sitting 12% above the pre-pandemic five-year average.
SMEs are driving much of this activity, alongside trades businesses, e-commerce operators and hybrid firms. These occupiers are seeking:
flexible unit sizes
proximity to urban centres
improved logistics capability
adaptable space for production and distribution
As a result, smaller units have become a key segment within the UK property market, with developers increasingly targeting schemes that can meet these specific requirements.
SME growth supports light industrial finance demand
Data from the Office for National Statistics points to further momentum. Quarterly business demography figures released in January show more than 71,000 new businesses were created between October and December 2025, a 10% increase year-on-year.
This rise in new enterprises suggests improving trading conditions for SMEs and reinforces demand for accessible industrial space. As more businesses launch and scale, the need for smaller, cost-effective premises continues to grow.
For lenders, this creates a clearer case for expanding light industrial finance options, particularly for developers focused on delivering units tailored to SME occupiers.
How lenders are responding to the shift
Paragon’s latest product forms part of a broader strategy to diversify its development finance offering and respond to structural changes in the industrial sector.
“Our new Light Industrial product reinforces our commitment to supporting ambitious SME developers and responding to structural shifts reshaping the UK’s industrial landscape,” said Neal Moy, managing director of development finance at Paragon Bank.
“Across the country, there is an undersupply for small, flexible and well-located industrial units, with SMEs increasingly looking to grow, improve their logistics capability or bring production closer to home. By providing specialist finance of up to £10 million over 24 months, we are enabling developers to deliver the high-quality units that modern businesses need to operate, grow and scale.”
He added that the launch builds on recent activity across multiple sectors. “This new product builds on a series of strategic moves we’ve made in the last year, including a growing footprint in later living, care, PBSA and Build to Rent segments, as well as raising our loan limit from £35 million to £60 million. Light Industrial finance is the next step in ensuring our developer partners have the support, clarity and long-term relationship focus they expect from Paragon.”
What happens next for the UK property market
Demand for light industrial space is expected to remain resilient as SME formation continues and businesses adapt their supply chains.
Lenders are likely to expand specialist products further, while developers may increase activity in smaller-unit schemes to capture occupier demand. At the same time, limited land availability and planning constraints could continue to restrict supply.
This dynamic is set to keep light industrial finance firmly in focus, as the sector plays a growing role in supporting SME growth and shaping the UK property market.
