The world of commercial real estate is buzzing with the rise of industrial properties. E-commerce’s growth has led to a big jump in demand for large industrial spaces. This makes investing in commercial real estate a great chance for smart investors1. Industrial real estate, worth over $1.5 trillion in North America1, offers great chances for making money passively because of its unique deal structures.
This guide will take you on a journey into the exciting world of industrial real estate. We’ll look at its history, the different types of industrial properties, and what to consider when investing. Whether you’re an experienced investor or just starting with commercial real estate, this guide will give you the insights you need to feel confident in the industrial property market.
Key Takeaways
- Industrial real estate is now a top choice for investors because of the rise in e-commerce and the need for bigger commercial spaces.
- Industrial properties include everything from small labs to huge facilities over 100,000 square feet2.
- Most industrial properties in North America are either manufacturing facilities or warehousing/distribution centers1.
- Investing in industrial real estate can lead to great passive income because of its unique deals and long leases.
- It’s important to know the different classes and uses of industrial properties to make smart investment choices.
Understanding Industrial Real Estate
Industrial real estate covers a wide range of properties for different industrial uses, like making goods, storing items, and doing research3. These places are often in special zones away from homes and shops to keep things running smoothly4.
What is Industrial Real Estate?
It’s about land and buildings for businesses that make, assemble, store, and move goods3. These spots are key for the economy to work well, giving businesses the space they need to do their jobs4.
Classes of Industrial Properties
Industrial buildings are grouped into classes based on how new they are, their quality, and what they offer34.
- Class A industrial buildings are the newest and best, with top-notch materials and modern systems34. They have low empty spaces and attract top tenants, but they cost more and have lower returns.
- Class B industrial buildings are older or newer but not as fancy, offering chances to improve them for more value34.
- Class C industrial buildings are the oldest and need a lot of work, but can be a good bet for investors ready for a challenge34.
The industrial revolution changed the economy and cities a long time ago3. It led to different types of industrial properties, each meeting specific business needs4.
| Industrial Property Type | Description |
|---|---|
| Manufacturing Facilities | Buildings made for making, putting together, and processing goods. |
| Distribution Warehouses | Big places for keeping, packing, and sending out products. |
| Data Centers | Special buildings for computer systems and storing and processing data. |
| Flex Spaces | Properties that can be used for many industrial, office, and research activities. |
Businesses want to be in places that save on costs and make things move faster34. More people are buying and building industrial buildings because of this3. Foreign money is also helping this area grow4.
“Industrial real estate has soared in popularity among commercial investors over the past decade due to the rise of e-commerce.”3
Industrial real estate is popular for its good investment traits, like clear deals and steady money coming in3. With more online shopping, there’s a bigger need for big industrial places for logistics and shipping, which is boosting this area3.
Industrial Properties: Your Guide to Commercial Spaces
Manufacturing Facilities
Manufacturing facilities are key to the industrial real estate market. They are where goods that power our economy are made. These places can be simple assembly lines or complex plants making industrial equipment.
They need special features like heavy electrical power, good drainage, ventilation, and strong floors5. Investors should think about what tenants need to make sure the property fits their needs.
Distribution Warehouses
Distribution warehouses are vital for the fast delivery of online orders. They are huge, like airplane hangars, and store and send out many products. They are near big roads and have lots of loading docks for trucks5.
Investors should look for good locations, lots of space, and efficient systems. This is because e-commerce and logistics companies need these things.
The industrial real estate market is growing fast, with sales of about $79B in the last year6. By the end of 2022, there was 742M SF of industrial space being built6. Places like the Inland Empire in California and New Jersey are good for investing6.
Big companies like Prologis, Clarion Partners, and Blackstone’s Link Logistics are leading the growth in industrial real estate6. The U.S. industrial vacancy rate was just 3.8% in November 20226, showing strong demand.
The rise of online shopping keeps making distribution warehouses more important6. Places like Northern New Jersey, Miami, and New York are good for investing in 20236. With a 2.8% vacancy rate at ports in Q1 20226, the market is still growing, offering great chances for investors.
Conclusion
Industrial real estate is now a key player in the market, thanks to e-commerce growth and the need for better production and storage spaces7. Rent for these properties jumped by 13.5% in Q3 2022, making them more popular than ever7. This rise is due to the booming online shopping, which led to a huge demand for space7.
Knowing about the different types of industrial properties and their needs is vital8. These properties offer long-term leases and can grow in value, making them a smart choice for investors8.
But, there are hurdles too7. Many industrial buildings are old, needing updates to meet today’s standards7. The industry also faces labor and environmental issues, like more jobs in warehousing and the push for electric fleets and automated warehouses7.
FAQ
What is industrial real estate?
Industrial real estate includes land and buildings for making things, storing goods, and shipping them out. These places are in special zones away from homes and businesses. They’re for activities like making products, storing goods, and shipping them.
What are the different classes of industrial properties?
Industrial properties are grouped into classes based on their age, quality, and features. Class A buildings are the newest and best, with top-notch materials and modern systems. Class B buildings are older or newer but lack some premium features, offering chances to improve them. Class C buildings are the oldest and need a lot of work but could be great for investors who take risks.
What are manufacturing facilities in the industrial real estate sector?
Manufacturing facilities are key in industrial real estate. They make the products we use every day. These places need special features like strong power, good drainage, and strong floors to work well.
What are distribution warehouses in the industrial real estate sector?
Distribution warehouses are big buildings that help get products to customers fast. They’re huge, like airplane hangars, and have lots of space to store and ship goods. They’re near big roads and have many loading docks for trucks. They also have systems to keep things organized.
What are the key considerations for investing in industrial real estate?
When investing in industrial real estate, it’s important to think about what tenants need. For making things, you need the right setup. For shipping goods, a good location and lots of space are key. This helps meet the needs of companies that ship a lot.
Source Links
- https://griffithscre.medium.com/a-beginners-guide-to-industrial-real-estate-aa29761bd363 – A Beginner’s Guide to Industrial Real Estate
- https://addresscommercial.com/what-is-industrial-real-estate/ – What Is Industrial Real Estate | Your Comprehensive Guide
- https://www.tylercauble.com/blog/industrial-real-estate – The Ultimate Guide to Industrial Real Estate — The Cauble Group
- https://www.doorloop.com/definitions/industrial-real-estate – What Is Industrial Real Estate | Definition & Examples
- https://aquilacommercial.com/pillar/the-ultimate-guide-to-finding-industrial-space/ – The Ultimate Guide to Finding Industrial Space
- https://www.biscred.com/guides/industrial-real-estate – Guide to Industrial Commercial Real Estate Investing & Properties
- https://toljcommercial.com/why-industrial-real-estate-outlook-is-great/ – 9 Reasons Why the Industrial Real Estate Outlook is Great – Tolj Commercial
- https://www.linkedin.com/pulse/investing-industrial-properties-weighing-pros-cons-james-gardenhire – Investing in Industrial Properties: Weighing the Pros and Cons
