How to Approach an Investment in Industrial Property

Industrial real estate includes warehouses, factories, depots, and storage facilities, and is often affordable to own and operate. It usually offers stable cash flow with long-term leases.

If you're considering an investment in industrial property, it’s crucial to do thorough research and understand the associated risks. While owning industrial property has many advantages, it can also become a significant financial burden if not carefully evaluated. With that in mind, let’s explore the steps you should take before investing in industrial real estate.

1. Define Your Investment Criteria

What are your goals for investing in industrial real estate? Are you looking to renovate and sell the property? Do you want to secure a long-term tenant? Or do you plan to use the property for your own business? It’s important to clarify your investment intentions, not just for agents and sellers, but also for yourself. Having a clear understanding of your objectives will guide your decisions and help you stay focused.

2. Future-Proof Your Investment

Begin by identifying assets that meet your criteria and pinpointing the most sought-after areas. Future-proofing your investment involves envisioning how the property will integrate into the market down the line. Consider factors like robust transport links, solid infrastructure, potential for future redevelopment, and effective entry and exit strategies.

Properties near key transport hubs are crucial for tenant supply chains, making them more appealing to potential occupiers.

3. Seek Out Good Opportunities

To succeed, you need to be actively engaged in the market! Stay informed about all ongoing activities. You can do this by attending auctions (even if you’re not planning to bid), browsing online listings, reading market research, and networking with agents. These activities are low-pressure but essential for spotting any potential opportunities that come your way.

4. Secure Your Income

If you've purchased an industrial property and are looking to establish a tenancy, it's essential to thoroughly review your potential tenant’s payment history and financial background to ensure they can consistently meet rental obligations.

Understanding your tenants' needs and their businesses is vital. The space should not only align with their operational requirements but also remain affordable. It's highly recommended to collect a security deposit—typically equivalent to three months' rent—to protect against potential damages or default.

Industrial tenants generally sign leases ranging from three to ten years. Opting for longer leases offers greater income stability throughout your investment period, minimizing the risk of void periods that could impact your revenue.