What is the industrial real estate and its impact in today’s business world?
The real estate industry has always been considered as the place where people live and spend time, including homes, offices, and retail stores. In contrary to these places, there is also an industrial place and that setting is known as industrial real estate. In this domain, all land and buildings are either utilized or suited for industrial activities such as manufacturing, production, assembly, warehousing, storage, distribution and more. As the demand for consumer products is climbing day-by-day, the need for physical warehouse space to fulfill these demands is also increasing.
For example, in the U.S., e-commerce holds about 9 percent of total retail sales and has been growing nearly three times faster than brick-and-mortar sales since 2010. E-commerce is identified as a limitless number of choices, faster delivery and flexible return options. However, this has put pressure on the supply chain and drive demand for industrial real estate to an unprecedented level. According to a recent CBRE Research study, for each US$1 billion growth in e-commerce sales, the industrial market would require 1.25 million square feet of warehouse space to support this growth.
Moreover, facilitating the quick movement of goods to consumers has demanded efficient logistics space and required the design of new warehouses that are larger in size and height.
Investing in Industrial Retail Estate
Industrial real estate involves all land and buildings that accommodate industrial activities. Investing in this industry can be a good business for savvy investors. It delivers considerable advantages to them.
Higher Yields
Investing in industrial property provides an opportunity for higher rental incomes as well as yields. Unlike residential real estate, industrial real estate gives firms access to more choices and large spaces as industrial properties are used for a large number of activities like manufacturing, logistics, storage, and production. Most industrial leases include fixed annual price increases, which are often linked to CPI.
Long Term Cash Flow
Typically, industrial tenants are willing to sign long lease agreements that provide investors with much greater security than a typical residential lease that is more likely to sign short leases. Most industrial leases are net leases. This means the occupant pays for costs that would normally be paid by the owner, including insurance, utilities, maintenance and repair costs.
Low Maintenance Costs
A good business reflects from an organization’s appearances as they maintain their buildings to a high standard. This means industrial buildings can be relatively low maintenance as the tenant is likely to attend to any maintenance issues quickly themselves. As industrial properties are maintained through high standards, they are less likely to face issues like wall molds and roof leakage, among others.
Briefly, industrial real estate offers vast options, versatility, higher diversity and stability and more than residential real estate.
