Industrial properties are a unique submarket in the commercial real estate arena that serve as storage facilities, laboratories, testing grounds, showrooms, logistic hubs, telecommunication centers and more. There are several reasons why industrial properties can be good investments. Let’s cover a few.
The Demand for Industrial Properties
In 2019 alone, sales of industrial properties soared over $55 billion due to growing demand. The rise of online shopping has made industrial properties, such as warehouses, a prime pick for companies like Amazon, as well as large shipping companies near or along major freight lanes. Companies typically lease industrial properties in blocks ranging from three to ten years, giving commercial real estate investors a stable source of revenue for longer periods than residential properties. With longer leases, lower turnover, and higher demand, commercial real estate investors have leeway to charge higher rent premiums on industrial properties.
Leasing Options for Industrial Properties
Leasing industrial properties to business tenants removes some of the risks and costs typically associated with residential rental properties. Many industrial tenants will sign net leases, which means the tenants will pay for utilities, upkeep, maintenance, repairs, and similar expenses. Industrial tenants typically have their own maintenance crew or work with third-party maintenance companies. Additionally, maintenance companies sometimes cover insurance costs as well, because they want to protect their goods and equipment.
Industrial Properties Are Versatile
Industrial properties are shells that can be used for any commercial purpose with respect to zoning laws. What was a warehouse for a shipping company might become a brewery when new tenants take over the lease. A research lab may turn into a fulfillment center or even a server farm for a tech company. These changes place minimal requirements on the property owner because the tenants often pay for any necessary interior modifications or buildouts.
The Advantage of Multiple Tenants
Some industrial properties are large enough to house two or three different tenants. While this would require some remodeling on the part of the property owner to divide the interior of an industrial property, it creates multiple sources of revenue. As with residential properties, having multiple tenants is a good idea to create a cash flow buffer so revenue doesn’t dry up completely when one tenant moves out.
The need for space is not going to disappear. Businesses are going to require the benefits of industrial properties to store items, test out new products, and to house equipment. As businesses grow and consumers shift more toward e-commerce, the demand for industrial properties will increase, which will drive up the value of those properties.
Financing for Industrial Properties
Web Finance Direct offers commercial real estate financing solutions for industrial properties of all types. Whether you are looking at industrial properties that can be used for storage or larger spaces that can hold equipment and teams of people, we can help. Contact Web Finance Direct today to explore your financing options.