- Industrial properties can be a wise and lucrative real estate investment, offering long-term leases and low overhead costs.
- Appreciation potential for industrial properties is slower than residential or commercial investments; however still likely to increase with rising demand.
- Researching potential properties, including location, demand, age/condition, and local regulations, is essential.
- Establishing property maintenance and finding the right tenant are also essential to guarantee success.
- Working with experienced advisors can help investors make informed decisions when investing in industrial properties.
Industrial properties are often underrated real estate investments because they provide a stable source of income with often minimal maintenance costs. Despite this, investors overlook industrial properties favoring residential and commercial assets. This is unfortunate since industrial properties can be a sound investment when approached correctly.
Industrial properties typically have more stable tenants than other types of real estate investments due to the nature of their businesses, such as manufacturing and storage. These tenants often sign long-term leases that help ensure a steady income stream for property owners. Furthermore, industrial buildings may also require little maintenance beyond regular cleaning and upkeep, helping to reduce overhead costs.
Regarding appreciation potential, industrial properties may not experience the rapid appreciation of residential or commercial real estate. However, they are still likely to appreciate over time due to rising demand for industrial space and increasing land values in specific markets. In fact, according to a report by CBRE Group Inc., industrial property prices grew faster than any other asset class in 2020 — up 8% compared to 2019 — making it one of the most attractive real estate investments available today.
So what should happen if you’re considering investing in industrial property? Here are a few tips to help you:
Research Potential Properties
Industrial properties are often a lucrative yet overlooked real estate investment. To ensure the success of any industrial property investment, you must research potential properties to understand their value and potential returns before investing. Here are a few factors to consider when researching industrial properties:
Location
When researching industrial properties, it’s essential to consider the location of the property and its proximity to transportation links, such as airports and rail lines. Easy access to transportation means tenants have greater flexibility in business activities. Additionally, being located in an area with low crime rates helps keep tenants safe and ensures security for the property.
Demand
It is also necessary to assess the demand for industrial space in a given area before investing. This can be done by examining historical rent prices and vacancy rates in the local market over time and looking at current occupancy trends within nearby comparable properties. Additionally, talking with local brokers or landlords can provide valuable insight into current conditions impacting rents and vacancy rates. The more information available about a specific market, the better-informed decisions investors can make regarding which properties are worth investing in.
Building Age and Condition
Building age and condition are other factors to consider when investing in industrial properties. Understanding if a building has been well-maintained or needs significant repairs is essential for estimating future maintenance costs correctly. Older buildings may require more frequent repairs than newer ones due to outdated materials or lack of maintenance over time. Still, they may also offer investors unique opportunities if they are willing to put additional capital into renovating them.
Regulations
Lastly, it’s essential to research any applicable regulations for each prospective property before investing to avoid surprises that could affect profits or cause delays in completing renovations or improvements. Investing in areas that restrict businesses operating near residential neighborhoods could limit earning potential from sure tenants. In contrast, zoning laws could limit expansion plans for specific buildings or types of companies interested in renting space within them. Understanding relevant regulations can help investors make intelligent decisions about where they invest their funds in industrial real estate investments.
Ensure Property Maintenance
Maintaining industrial properties ensures their long-term success as a real estate investment. Industrial property management services can help remove property owners’ burden by managing and maintaining the asset. These services are designed to help maximize profit, minimize expenses, and reduce the time spent dealing with tenant issues.
Industrial property management services can provide valuable assistance with day-to-day operations. This includes collecting rent payments, handling tenant complaints and inspections, and following all building regulations. Additionally, they can assist in marketing vacant space to attract new tenants and create sound policies for tenant screening to ensure responsible parties occupy the space.
Property maintenance is also essential for industrial properties since regular upkeep ensures a safe environment for workers and tenants alike. Property managers can be invaluable in this area by helping arrange for repairs or replacements when necessary and guiding specific safety requirements needed to maintain compliance with workplace safety regulations. Furthermore, they can also negotiate better prices on materials used in routine maintenance tasks such as painting or replacing windows or hardware fixtures.
Find the Right Tenant
Finally, finding the right tenant for any industrial property is essential. To do this, investors must consider various factors, such as creditworthiness and business type. A good tenant will pay their rent on time and maintain the property by its regulations. They should also have an established business history demonstrating their commitment to success and longevity. Finding the right tenant is critical to long-term profits since they will be responsible for ensuring the success of your investment over time.
A tight-knit, fool-proof tenant contract will also help protect your assets and ensure that the tenant follows all business and property use regulations. Industrial property investors should work with an attorney to create a comprehensive contract that protects their interests, such as outlining specific rules regarding maintenance and safety procedures or clauses for non-compliance.
Final Thoughts
Industrial properties provide a tremendous opportunity for investors to earn steady returns with minimal maintenance costs. Industrial real estate can be incredibly lucrative by researching potential investments, maintaining the property, and selecting the right tenant. Working with experienced advisors is essential for successful investment in any asset class. Consult with professionals when making critical decisions regarding your real estate investments.
