Buying and selling industrial real estate is big business.
It plays a major role in the daily lives of most people without them even realizing it.
How To Purchase An Industrial Property
While most people will see it from the angle of large factory buildings with huge machinery working tirelessly, it doesn’t paint the complete picture.
Consider the daily supplies you need such as toilet paper, clothing food, and several others. At some point, these had to sit in industrial property or warehouses in readiness for distribution.
When it comes to industrial real estate, it involves the purchase and sale of these types of properties.
This article will be looking at the basics involved in buying up industrial properties. If you wish to become a player, you’ll need the information provided here.
The Class of Property Matters
Industrial properties are broadly categorized into three types; class A, class B, and Class C properties. What are these about and how do they impact your investments?
Every investor will want to go with what fits their purposes and plans.
In a nutshell, you want to know what makes the most sense for your investment.
Class A Industrial Properties
If you want to invest in industrial property with a potential for low vacancy rates, then class A properties will be the most ideal. What are these about?
These offer lower risks or cap rates, thus ensuring that your income is stable and long-lasting with minimal risks involved.
Of course, most realtors will want to have such investments. However, one thing you must know about class A properties is that they attract a higher price.
The reasons are obvious; with a lower cap rate or risk, your chances of growing your investments are quite high.
In terms of the type of properties that fall under this category, they include newer industrial buildings or structures built from high-quality materials. Plus, these also boast top-notch utility and mechanical systems.
In a nutshell, these are considered the very best industrial properties to invest in.
Class B Industrial Properties
Unlike class A industrial properties, class B properties tend to be older. Although some newer buildings can be categorized under this class, they’re mostly not as equipped as class A properties are.
One advantage of class B industrial properties is that they can be upgraded through renovation.
Upgrading these will see them being classified as class A properties or a little less than class A properties.
Although there are significant chances of recouping your investments, there’s a downside to buying class B properties.
This mostly has to do with the higher risks involved as a result of potential vacancy problems.
Here, rental incomes tend to be lower when compared to class A properties. Despite lower rental rates, class B industrial properties have their own benefits or advantages.
The value of such properties can appreciate over time due to the land they sit on. However, this only applies when it’s in an ideal location.
Class C Industrial Properties
From our discussion so far, it’s easy to see that the value of these real estate properties is tied to the class they belong to. Class C properties tend to be less valuable compared to class A and B properties.
In other words, these attract the least rental rates in the market.
Knowing that helps you evaluate your investment choices. Class C properties mostly include older structures or buildings 20 years older or more.
One thing that’s common with most class C properties is that they’re mostly in a bad shape, but can be renovated or converted.
Such conversions and renovations will take up a lot of costs. So, you’ll need to decide whether these properties are worth investing in or not.
To properly assess your preparedness, you’ll need to consider the funds or capital available to you. This helps with a realistic assessment.
What Type of Industrial Property do you wish to Buy?
One of the primary considerations to make when seeking to invest or buy an industrial property is the type available and what appeals most to you. This involves quite a lot of work and deliberations.
There are several types of industrial real estate to choose from.
For example, you may wish to invest in an industrial showroom, light assembly properties, flexible warehousing, and industrial land.
Other types to consider include bulk warehouse, heavy manufacturing, custom-build or built-to-suit, data centers, and cold storage.
These types of properties offer different kinds of opportunities to realtors. You’ll need to know what they are and how best they meet your investment goals. The investment aims to grow or appreciate the same.
So, you don’t want to settle for a property that barely offers any opportunities.
With industrial showrooms, you’re allowing manufacturers to showcase their products in a retail environment. Of course, industrial showrooms require high visibility.
When buying such properties, your target will be small-scale manufacturers seeking to reduce warehousing & shipping costs.
Light Assembly Properties
As the name suggests, a light assembly property is only designed for purposes of product coupling or assemblage. With these assembled, they’re shipped out to distribution locations.
A property can be purposed for great flexibility.
This is what flexible warehousing is about. It’s most desirable by a lot of small businesses as they get to be competitive enough and also have ready access to the market.
With industrial land, you get access to virgin land that’s purposed for industrial uses.
Here, you get to develop the land to suit the client’s purposes. The good thing with this type of investment is that the client pays upfront for custom-built structures.
Bulk warehousing is large scale. It requires significant access to capital to construct or build.
These are major distribution hubs from where products are distributed. Of course, they mostly sit on a large expanse of land and have a network of roads and other amenities.
Industrial real estate is huge with lots of different opportunities for all types of investors. We’ve discussed some of the opportunities for investments above.
Based on your preferences, you get to choose what serves your needs best.