When considering expanding a portfolio, an investor may want to search for properties that are familiar to them. For some investors, that means multi-tenant residential properties; for others, that is retail or medical listings. However, one way to increase diversification is to go outside that comfort zone and find something completely new.
Industrial real estate is a growing industry for many real estate investors. Industrial spaces can have many uses, but they all have a few things in common: their tenants need the space to run their business and they will stay in one place for a long time. Let’s take a look at industrial spaces for sale and how these industrial properties can grow your portfolio.
Defining Industrial Spaces for Sale
Within commercial real estate, industrial properties for sale are one sector investors look to add to their portfolio. When we look at industrial real estate, there are many different types of industrial properties for sale that fall under this umbrella. Industrial spaces consist of commercial real estate properties used for industrial purposes, like an industrial warehouse, industrial office, factories, manufacturing or logistics management. There are many different listings, and a space may be able to be used for more than one purpose, depending on the tenant’s needs.
Why You Should Invest in Industrial Spaces
As you consider what types of properties to invest in, here are 6 reasons you should invest in industrial spaces.
- High diversity: For many investors, diversifying portfolios is key to their success. By having different types of commercial real estate properties, many investors find they are better able to ride out economic changes and challenges, while also having the opportunity to pursue different options across many industries. With industrial properties, there are many different types of properties that can help to further diversify your portfolio: manufacturing, logistics, storage, production, and other types of industrial spaces are always in demand.
- High income returns: Industrial properties for sale can bring a higher return on your investment. Often, an industrial space is a long term cash flow for investors, as tenants tend to sign longer term leases to help keep their businesses running smoothly without the need to pack up and move. This means you will have the peace of mind knowing that industrial property type will not sit empty and will bring you a consistent income for years to come.
- Lower risks: With industrial spaces, there are often lower risks in a few key aspects. For one, you will see a lower market saturation risk, meaning there’s a less likely chance of oversupply in the market. Another risk you may be able to avoid with an industrial space is problems with the property, as the tenant’s business is directly tied to the property’s production capabilities. With other commercial real estate you may have experienced challenging tenants, and in industrial real estate, that is usually not the case.
- Supply and demand: Generally speaking, the industrial real estate market has been stable as e-commerce continues to impact supply chains and the need for industrial storage, industrial warehouse and distribution facilities grows. There has been a consistent demand for commercial real estate and industrial spaces, and as businesses continue to reopen or shift operations, that need is projected to continue to grow in coming years.
- Less involvement: One of the key draws to industrial spaces is the lower involvement requirements for investors. With triple net leases, like those often used in industrial real estate, many of the responsibilities are passed on to the tenant, leaving the investor free to focus on other projects. These responsibilities often include maintenance and repairs, as well as financial responsibilities like property taxes or insurance premiums.
- Flexibility: If you get to the end of a commercial real estate lease with a tenant and they decide to relocate, your property will likely attract another tenant fairly quickly. And the benefit of industrial spaces is that they are very flexible and versatile, so you will not be tied to just one type of business or industry. Many industrial properties for sale are just open spaces with walls and a roof, and maybe a few industrial office spaces. This means the tenant that is leaving and a new tenant could be using the space for very different things. You could even look into multiple tenants sharing the space, if it’s a large property and tenants only need a portion of the space you have available (this may work well with a storage space or smaller industrial warehouse in particular).
What to Look for in an Industrial Space for Sale
Because industrial real estate is an increasingly popular investment opportunity, there are a few aspects investors should look at when evaluating a property they may want to purchase. These three points can help drive your conversations with your commercial real estate broker team and narrow down the search as you begin finding industrial spaces for sale.
Location: First, consider the location. Do you want to invest in a large city, a certain state, somewhere you already have properties or are familiar with? If so, that can help to narrow down where you and your commercial real estate team are looking. If not, this may become clearer to you as you begin searching for properties for sale. As you look at properties, no matter the city or state, be sure to note their proximity to transportation as well as the part of town they are in. Many industrial properties will have regular deliveries or pickups from trucks or other large vehicles, so be sure there is space for that on the property and in the surrounding areas.
Tenant type: If you know you want to work with an industrial warehouse only, that will help you determine the property types to look at. If you are interested in a multi-use industrial space or one that can be more versatile for the tenant(s) that use the space, that can also help with the search criteria. The type of tenant you want to work with should have a strong history and be relevant to the area, so they will continue to be successful in your property.
Property: There are several elements that make a property good for industrial use. Depending on the use of the space, some of these may not be as necessary as others, but they are good to consider in case the use or tenant changes in the future.
- Is it easily accessible from major transportation areas (interstates, airports, etc.)?
- Is there space for large vehicles or trucks to drive through nearby streets and into the parking lot?
- Are the roads in good condition to handle heavy vehicles?
- What is the height of the property?
- Are there loading docks already in place?
- What’s the square footage of the property?
- Is there an industrial office, in addition to the industrial space, if so how many?
Work with a Qualified Broker Team for Industrial Properties
As you begin to consider adding industrial properties for sale to your investment portfolio, the Sands Investment Group Industrial Real Estate Team is ready to help. Our broker team has extensive experience helping investors find and purchase an industrial flex building, industrial warehouse, distribution centers, cold storage facilities, research & development facilities, manufacturing, pharmaceutical & medical industrial properties and self-storage properties. From existing industrial assets to built-to-suit development to buyer representation for 1031 exchanges, the Industrial Listings Team at SIG has the knowledge and expertise to guide you through adding an industrial property to your business. Call 844.4.SIG.NNN or contact us here to learn more about working with our team.