Do's and Don'ts - Investing in Industrial Warehouse

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Do's and Don'ts - Investing in Industrial Warehouse
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We are in an era where expenses are rising, capital is depleting, stocks are not dependable, banks don’t pay enough on fixed deposits and every traditional option for investing seems hazy. However, with the rise in prices of everything, the prices of real estate also are on an all-time high. This opens up new and great opportunities for serious investors. Most commercial properties have always been a lucrative investment. But what is generic in this scenario is that investors opt for the pretty over the rusty. Everyone would not bat an eye to invest in a good shop space in a very good commercial building, but no one really ventures into or even thinks about rusty old warehouses.

Most of the companies which were production based are shifting to importing and distribution because labour is expensive and factories are set up in countries which provide less labour costs. This gives rise to increase in import volume which in turn gives rise to the demand for storage of these imported goods.

A recent survey has shown that the rate of vacancy for industrial warehouses ranges from 4% to 6%, while the rate of vacancy for shop buildings is at 13.7%. The rate of warehouses will improve further since the construction of the new warehouses is minimum, and as the country is pulling out of recession, there is a steady increase in inventories.

But before you invest in a warehouse facility, it is a good idea to look into the features of the warehouse that are appealing to potential tenants. It is an impossible task to meet every tenant’s requirement, but there are certain standard ball parks then you are good to go.

  • Height of the warehouse

The height of the warehouse known as the clear height is an important aspect of warehousing. Clear height refers to the distance between the floor and the clear ceiling. That is to say the height before any obstruction comes in the way like a fan or a pole or a bar running across. This is important for storage and stacking of cartons. These days’ warehouses come with a clear height of 30 to 32 feet as against the earlier 12 to 24 feet norm.

  • Loading Dock

The unloading can be done either in the warehouse or outside. It is however, preferable to have an external loading dock. Because then the buyer will not be required to create a separate on inside. You can fiond over 1500+ Industrial warehouses for sale and lease in Brisbane at Commercialproperty2sell.

  • Land Area

Here more the merrier applies. More land that comes with the property is always useful for some extra storage or parking space.

  • Office space

An office space is important. Generally about 5% to 10% of the total square footage is acceptable for a dedicated office room. More would lead the buyer/tenant to reconsider his options in terms of worth and less would require the buyer/tenant to spend money on expansion.

  • Location

It is a golden rule in all properties. With fuel prices on a steady rise, it is a good idea to have a storage facility that is close to the expressways, ports or cargo docks, and then it can be of a higher value than the ones that are located far away.

Other considerations would be a unit with mechanical operating doors would be preferable. Another area that is worth a look is the security, a unit with that comes with a fair amount of security would fetch a higher price than the one that does not.

Apart from the traditional warehouses which were no windows, cinder-block, low construction cost building located in a faraway smoke-stack, there are other self-service units which provide separate storage spaces with varying sizes which are put up in a single building or a cluster of buildings. The users of this space belong to a wider range than just importers and retailers. Some major groups of tenants include;

  • Single family homes

With the lack of space, the homes are shrinking and now compromise on basement or attics. In addition to this, many have mobile or modular homes that do not allow storage. These families might require space to keep seasonal equipment like snow blowers or skis.

  • Apartment dwellers

Few apartments have space to keep anything substantial. And in some cases, people who live in apartments cannot afford a family home. These tenants hire storage space for keeping their extras. This would also include retired couples who have sold their houses and need space to keep their extra furniture.

  • Local Business operators

This group represents that largest user of these self-service warehouses. With low square footage available in a standard shop space today. These businessmen are reluctant to keep files and stores in the place of operation and very often rent a space near or close to their place of operation. Doctors, auditors, lawyers, insurance agents are required to keep their old files for years. These are not professionals with a big office space. They become a large chunk of the tenant group who rent self-service storage facilities.

  • Better locators

These types of tenants are looking for better located storage options. If these are your target tenants, then they generally look for facilities a few miles from place of work or stay. Also one that is close to a main road or an expressway for convenience.

Industrial real estate as against other real estate investment is a better options for various reasons;

  • Less management headaches

These properties are often taken on rent by companies or blue colour worker who often manages the property themselves. They seldom complain about facilities or a burned out light bulb or adequate plumbing in the toilet.

  • Greater long term stability

The typical lease period is 3 to 5 years or even 10 years in some cases. When you look at the turnover, the industrial property has a far lesser turnover than commercial properties. This would mean that an industrial investment is more viable than a commercial one.

  • Cap rate/returns

Industrial property does not hit home run or have high and low swings in investment. It is a more stable and steady form of investment and return

  • Flexible

Warehousing needs of different users are different. Not all require a lot of space, or an office room, or that high a ceiling. So whatever your space, you can be sure to find a tenant

  • Shrinking

As commercial property is increasing, it is eating away the industrial sector. With the industrial sector shrinking, the need for these properties will increase, leading to fetching a high price.

Keeping in mind the uses, users and the benefits of an industrial warehouse, investing in one only shows lucrative returns and a viable investment option. 

Author Info Manish Khanna

Manish is founder of Business2sell Group of Websites. 

Business2Sell.com.au is one of the leading business and franchise for sale listing websites. We work with our business brokers, commercial agents, franchisors and private sellers to help them connect with the right buyers for their opportunities. 

With website now functional in Australia, United States, United Kingdom, Canada, New Zealand and South Africa. We have over 18,000 businesses for sale listed, with over 220 Business Broker and Commercial Agent. 

I have over 20 years of experience in Web Industry; I have been involved in websites industry since the early years of 1996-97. In my professional career I may have worked for over 10,000+ websites. My Specialty is to build portals or complex online applications.

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