The missing middle: why advanced manufacturing needs a different approach to industrial space

For an innovative manufacturing business, getting from a successful prototype to commercial production is a huge step.

It is also where many businesses encounter the “valley of death” – the difficult gap between proving that a technology works and having the capital, capability and infrastructure to manufacture it reliably and profitably at scale.

The challenge is usually framed around finance. Companies need significant investment to scale but proving that they can scale is often what gives investors the confidence to provide it. But there is another part of this equation that deserves much more attention – property.

For manufacturing businesses, growth becomes physical very quickly.

More production means more equipment. More equipment means more space, more power and more specialist infrastructure. And businesses are often making these decisions at precisely the point when cash is tight, their processes are still evolving and they don’t yet know exactly what their mature operation will look like.

This creates a difficult question, “where do you go when you’ve outgrown R&D space, but you’re not ready for a conventional large-scale manufacturing facility?”

For many scaling manufacturers, finding the right industrial space is a Goldilocks exercise.

The building needs to be affordable, appropriately serviced and in the right location. Take any one of those factors away and the proposition can quickly become unworkable.

Price matters.

For a young company, every pound invested in property is a pound that cannot be invested elsewhere in the business. Taking significantly more space than is needed, or spending heavily to make an existing building suitable, can put unnecessary pressure on growth capital.

Infrastructure matters.

A building might have the right floorspace and appear affordable, but lack the power, structural capacity, ventilation, drainage or other servicing required for a specialist manufacturing process.

Something as simple as drainage can take an otherwise suitable building off the table, because it’s so expensive to retrofit.

Location matters too.

Not simply in terms of access to transport, but access to talent, supply chains, research institutions, customers and other businesses operating within the same ecosystem.

For innovative manufacturers, being close to the right people and facilities can be critical to growth. That proximity matters within the business too. Many start-ups begin with a handful of bright people constantly bouncing ideas off each other; but the wrong layout of a place can fragment those relationships.

This is where the idea of the “missing middle” becomes important.

The journey can look something like:

R&D / incubator → pilot production → scale-up → commercial manufacturing

Yet the property market does not often provide a smooth transition between those stages. Businesses can outgrow an incubator or laboratory long before they are ready to commit to a large, bespoke manufacturing facility.

The challenge becomes particularly clear when you look at businesses developing entirely new manufacturing processes.

Take one innovative UK business developing breakthrough cultivated meat technology, for example, where we’ve been advising on the space required to support its journey towards commercial-scale production.

The physical requirements for producing one gram of a product can be very different from producing one kilogram and different again at 100 kilograms.

The business, the process and the property requirement are all evolving simultaneously.

That creates a difficult commercial calculation.

A company cannot realistically move into a new building every time its production process scales. Equally, taking a facility designed around what the business might need several years from now could mean committing valuable growth capital too early.

This is the property manifestation of the valley of death: “The business needs the space to prove it can scale, but it may not yet have the certainty or capital to commit to the space it will eventually need.”

We have seen a similar challenge through our work with an innovative battery technology business, where the search for suitable space highlighted just how difficult it can be to find a property on the market that brings together all of the necessary factors”

One property might work on price but not infrastructure.

Another might be technically suitable but in the wrong location.

Another might offer the right amount of space but require too much investment to make it operational.

The issue isn’t necessarily a lack of industrial buildings.

It is a lack of the right industrial buildings, in the right locations, with the right infrastructure, at the right point in a company’s growth journey.

That’s an important distinction.

It is unrealistic to expect every business to accommodate its entire journey from discovery and experimentation through to late-stage manufacturing within a single facility.

Instead, we need to think more deliberately about the ecosystems around these businesses.

Innovation clusters, research institutions, incubators, pilot facilities and established manufacturers can create an environment where businesses can move between stages without having to completely disconnect from the networks that helped them get there.

There is a practical benefit to this.

A scaling business surrounded by complementary companies can share knowledge, access specialist expertise, develop supply-chain relationships and compete for talent within a much stronger ecosystem.

That can be particularly important for advanced manufacturing, where the skills and infrastructure required can be highly specialised.

The property market therefore has a role to play beyond simply providing floorspace.

This isn’t a problem architects can solve alone.

It requires developers, investors, landowners, infrastructure providers, occupiers, designers and innovation ecosystems to think differently about what scaling businesses actually need.

For developers and investors, that means understanding the operational requirements of the businesses they want to attract.

For landowners and infrastructure providers, it means considering how power, servicing and connectivity can support more specialist uses.

For designers, it means understanding not only the manufacturing process and its likely evolution, but how the people behind it need to work together as the business grows.

And for innovation ecosystems, it means considering what happens when a business is ready to leave the incubator and where it goes next.

The opportunity is to create more flexible, better-serviced and better-connected industrial environments that recognise the reality of the scale-up journey.

Because if the UK wants innovative manufacturing businesses to grow here, the physical conditions for that growth need to be part of the conversation from the beginning.

Advanced manufacturing has enormous potential to contribute to the UK’s future economic growth, competitiveness and industrial resilience.

But innovation does not become industry simply because a technology works.

Businesses need access to capital, talent, supply chains and customers – and they need somewhere to make the thing.

The question for the property industry is no longer just, “What industrial space do we have available?” It’s, “What does a scaling manufacturer need next, and how can we help create the conditions for them to get there?”

Getting that right could help close one of the most difficult gaps in the journey from innovation to commercialisation.

And it is a conversation the property and manufacturing sectors need to have together.

Next week, Mark will be joining the Manufacturing, Defence and Logistics panel at Last Mile & Industrial Power, exploring how the property sector can better respond to the operational, security and technological demands of advanced manufacturing and defence.

The discussion will look at the practical challenges shaping the next generation of specialist industrial space – from site planning and design standards to energy requirements and supply-chain integration.

If you’re thinking about the spaces, infrastructure or property needed to support innovation and growth, get in touch with Mark, or catch him at Last Mile, to continue the conversation.

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