As the demand for industrial real estate increases, considering investing in these type of spaces to rent to commercial entities is a smart move to take your piece of the pie. Multi-tenant industrial buildings are a simple way to generate further value from your real estate, by ramping up your property’s value and guaranteeing a return on investment.
In general, it is much easier to manage multi-tenant properties versus single tenant properties. This is mainly because of leasing agreements involving tenants paying an amount of the operating expenses and maintenance costs. Industrial space tenants also don’t have a requirement for extra building services such as private cleaning contracts or front of house staff because these type of buildings don’t typically have areas with other uses other than for industrial use.
Along with being relatively easy to manage, from a property ownership perspective these industrial properties are less pricey to own due to the triple net basis of all tenants contributing to operating and maintenance costs.
Utilizing industrial property makes it easier to offer your services to a variety of tenant types. Industrial buildings come in all sorts of shapes and sizes – creating options for tenants with multiple needs. Spaces categorized as industrial have the flexibility to be solely manufacturing, or solely distribution, or solely office space or a combination of teams that are required for the particular industrial business.
The internet now rules most markets, and the retail market is no different. Retailers will not maintain a competitive presence in the market unless they tap into the online world also. Due to this significant transition towards online retail, being spearheaded by industry leaders like Amazon, a lot of businesses now require extra shipping and logistical space for their operations. The demand for these type of spaces is only going to increase as the industry grows further. Through multi-tenant industrial building investments, you are locking in the return of your money along with being able to generate more money from these buildings because the growing number of online based companies require available industrial space to function.
Increased demand for Industrial Real Estate
As the demand industrial real estate is thriving, driven by the explosion of businesses transitioning to solely online and requiring increased logistical space, effective industrial space is becoming more difficult to source. A lot of industrial facilities are single units with just one tenant, however, by splitting up these buildings into different sections and designing them in such a way to cater for dual tenants, you are ensuring a source of income due to the high demand for industrial real estate.
Why Industrial Real Estate is Flourishing
2017 as a whole, represented a massive lucrative for the real estate world. The first quarter alone saw sales growth of 3% – roughly a $13.9 billion dollar increase. Figures of this magnitude are reflective of the attention the real estate industry is getting.
The rise of online businesses
One main driver of the industrial real estate industry is due to the remarkable growth of online companies and the increased adoption of online shopping. More than ever before, online retailers and distributors are widening their business channels, resulting in more online businesses cropping up. Naturally, these businesses, especially online retailers of clothing or sports equipment require storage space for their items – resulting in the demand for storage space. The majority of these newer businesses start by renting several smaller warehouses as pilots for their startup business, and following success they expand their rentals to more industrial spaces elsewhere or seek bigger spaces. Companies that were traditionally solely “brick and mortar retailers” are also transitioning towards online sales to remain competitive. These firms who previously shipped from storefront to storefront or from store to customer require distribution spaces to ship products directly to customers from their logistic centers as opposed to having all their stock in stores that aren’t easily accessible.
One growth generation tactic being employed by a lot of companies is through offering free same-day, next-day and two-day shipping on their products. Logistically speaking, in order for businesses to deliver on their promise they need warehouses that are filled with product in various sites across the country. Firms are now opting to work out of multiple smaller sites which make delivery easier versus operating from one centralized distribution center which will not offer flexibility for shipping.
In tandem with the need for delivering quicker shipping turnaround times and the dominance of online commerce, businesses are seeking industrial spaces to assist in storing their inventory in the most cost-effective way possible. Instead of purchasing one expensive site with potential for development, online companies are opting for industrial spaces with smaller square footage and taller ceilings. Storing inventory vertically is a more cost-efficient method compared to spreading their goods over large areas.
How to source off-market industrial spaces using Reonomy
Reonomy is a commercial real estate technology platform with over 47 million off-market commercial properties listed across the U.S. The platform’s search features can be leveraged in such a way to find that diamond in the rough property, depending on your needs. For example by using filters such as search by location, search by asset class, search by year built.
Below is an example of a typical search for an industrial space in Nevada. As you can see the search returns us with 10,637 different options matching our criteria in the state of Nevada.
To cut down the results more and make the figure more manageable to analyze, we have selected only general type industrial facilities in Nevada state. This now gives us a figure of 5,533 to work with.
Given the trend outlined above where companies are investing more so into multiple smaller sites to cover certain regions and deliver on their service offering, we will now just focus on regional type warehouses. This provides us with 116 properties in the Nevada region where you can browse through an abundance of information on each such as ownership information, last sold date and square footage.
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