Industrial real estate comprises depots, storage facilities, factories, and warehouses. It is primarily cheap to own and operate. Usually, it offers stable cash flows from long-term tenancies.
How to approach buying for industrial real estate? Like any other property, conducting thorough research and being aware of all related risks is wise. Though there are several benefits to owning industrial real estate, it can prove to be a substantial burden when it is not subject to in-depth investigation.
Types of Industrial Real Estate
- Industrial plots
- Warehouses and buildings
- Factory units
- Flex buildings
- Cold storage and refrigeration
Benefits of Buying
- High yields
The rate of return on industrial real estate is mostly much higher than on commercial and residential properties. The typical growth of the worth of this property is an increase of 7 to 10% every year. Higher yields ensure early recovery of invested amount leading to the reaping of great profits in the long term.
- Long periods of lease
It is typical for industrial real estate, like plots and factories, to be leased out for long periods, like 99 years. In fact, the shortest lease period of a factory is 3 years, which is beneficial for owners.
- Tax payments
A significant benefit of industrial buying is that the tenants have the responsibility to meet all financial outgoings. All rates and taxes like management fees, land tax, water rate, and council rate are borne by the tenant, ensuring a high cash flow to the buyers.
Tips for Buying
Following are some tips to buy industrial real estate, like an industrial plot in Panchkula:
Define the Criteria of Buying
What are the ambitions behind buying real estate? Is it for upgrading and selling the property? Is there a targeting of a long-term tenant? Is there a prospect of occupying the property on one’s own? There exists a wide range of options, and you should enable one’s option for buying, which is highly evident to vendors, agents, and oneself. By doing this, you can facilitate a smooth buying process since all parties involved will be totally aware of the end objectives.
Future Proof Investment
Look out for assets that match your criteria and identify the areas with much popularity. To future-proof your amount, you should think ahead and imagine how the property will fit into the future market. Consider attributes like exit and entry strategies, future opportunities for redevelopment, good infrastructure etc.
Regarding properties located close to key transport nodes, they are vital for the supply chains of tenants and more desirable for occupiers. Many e-commerce tailwinds have emerged in the 21st century, and hence, industrial real estate located close to residential areas is appealing to cater to the rising demand for shorter delivery times. Tenants in highly dense areas in urban spaces can typically afford high rents, and hence, the ROI will depend mostly on the location of the industrial plot.
To understand the potential for future development of a site, it is vital to review relevant zoning restrictions. A low ratio of site coverage offers an opportunity to expand the asset in the future and improve the generated income. Ensure one is updated with any zoning restrictions and has clear knowledge of potential restrictions and redevelopment opportunities.
Even those industrial units with an optimal ratio of office to warehouse and a simple configuration where units can easily be divided or split are often seen as attractive since these spaces can be useful for many tenants. The key factor is the flexibility of space that appeals to a more extensive tenant mix and lowers the risk of the property lying vacant for a long time.
Seek Great Opportunities
Since the stakes are so high, you must stay active in the market. This implies keeping yourself updated with all trends and issues in the same. This can be accomplished in several ways. You must attend auctions (even if you don’t intend to bid), read up on market research, speak to agents, and view online listings of real estate. All these are free of obligations but will be critical to ensure that you don’t miss any opportunities like projects of real estate developers in Panchkula.
If you have bought an item of industrial real estate and are now seeking to host a tenancy in the property, ensure that the financial history, including past payments of potential tenants, is reviewed carefully. This is so that tenants can adhere to making rental payments sans any danger to both of you.
It is critical to know the requirements of tenants and their businesses such that the space occupied by them not only complements their business requirements but is also affordable. Experts make the strong recommendation to arrange a security deposit (typically rent of 3 months) for mitigating any damage brought out by tenants on the property and any risk of default.
Typical leases of tenants of industrial property range from 3 to 10 years. But longer leases offer more certain income in the investment horizon. This lowers the risk of erosion of future income in void periods.
In sum, full information is critical while buying industrial property. It is good to speak to your agents and seek their advice for staying informed on the trends in the market. This enables you to make a good income and gain profitable assets for the future.