How to Buy Industrial Property for Investment?

Investing comes in many forms, from stocks and shares to residential property for leasing. But, as any experienced investor will tell you, the more you can diversify your portfolio, the stronger it becomes, and one area that is great for investment is industrial property.

But how do you get started when buying industrial property for investment? That’s what we’re going to look at today. Below, you’ll find information on what you can expect when investing in commercial property, along with the different types of investment opportunities you’ll find on the commercial property market.

What is Commercial Property Investment?

Much like residential property investment, commercial property investment (or “industrial property investment”) involves acquiring and managing property. However, the key difference is that the property you buy will be primarily used for business purposes rather than residential living.

Income is generated through leasing arrangements made with businesses, and, over time, the building appreciates in value, making for a lucrative exit strategy.

What is the Difference Between Residential Property and Industrial Property?

While it may seem that there isn’t much of a difference between commercial property and residential property, there are a few things that separate the two, and these may influence whether or not industrial property investment is the right choice for you. These include:

Purpose of Use

As we’ve mentioned above, one of the biggest differences between commercial property and residential property is what it is used for. Residential properties are used for housing, while residential properties are used for business purposes, such as retail spaces, offices, factories, or warehouse space.

Tenant Types

The difference in the purpose of use also means that you’ll be renting the property to different types of tenants, and commercial property is rented to businesses or corporations who often have large budgets, resulting in higher rental income.

Lease Terms

In general, lease terms are longer on commercial properties, which provides more stability over a longer amount of time. Residential property, on the other hand, tends to have shorter lease terms, resulting in a higher turnover of tenants.

Property Management

Commercial property often requires professional property management, as leases, maintenance, and tenant relations are often more complex, while residential property is often handled directly by the owner.

Market Dynamics

Both types of property see different market dynamics as well, with commercial property being affected by economic trends and local business conditions and residential property being influenced by housing demand.

Financing

It’s typically harder to get finance in place for commercial property as it involves higher upfront costs and complicated financing structures. With residential property, the entry barriers are generally lower, and financing options tend to be more straightforward.

Diversification

Commercial property provides a good amount of diversification for investors with existing residential real estate, offering exposure to different market dynamics in the process.

Types of commercial properties

There are a few options available to you when looking for available commercial properties for investment, and each comes with certain factors that you’ll need to consider.

Investing in Retail Property

Some of the most popular commercial properties for investment are within the retail sector, including malls, strip malls, and standalone retail spaces.

When looking into investing in retail properties, one of the most important things you’ll need to consider is location and accessibility. Proximity to major arterial roads, public transport networks, and densely populated areas with sufficient footfall will be more appealing to retail businesses and can also positively impact the property’s value.

Investing in Industrial Property

The term “industrial property” covers quite a wide range of different properties, including warehouse spaces, factories, distribution centres, and more.

As with properties aimed at the retail sector, location and accessibility are key factors to consider with industrial property. However, you’ll also need to think about zoning regulations, making sure that the property complies with local laws and is suitable for industrial use.

It’s also important to consider certain building specifications with industrial property, including ceiling height, floor load capacity, and potential for customisation. This will make it more appealing to certain businesses and their specific needs.

Investing in Office Space

Another property type you might want to invest in within the commercial property market is office space. Along with location, which is always the most important thing to consider when investing in commercial property, you’ll need to research the local office market, changes in work patterns, and economic trends.

You should also look at the existing amenities or potential improvements for modern technological infrastructure when looking at an office space, including high-speed internet capabilities, security systems, and other amenities that meet the needs of a modern business and, ultimately, make the space more desirable.

We’re here to help you at each stage when investing in commercial property, so no matter what type of property you’re thinking of investing in, contact our team of experts today. We’ll answer all of your questions over a no-obligation 15-minute call and help get you started on your investment journey.

Tips for Commercial Property Investors

Investing in commercial property is often very rewarding, but it can also be complex, and there are certain things you’ll need to think about to make sure your investment gets the maximum possible return.

One of the most important things you can do when looking into investing in commercial property is to conduct thorough market research. Look at both local and regional trends, along with vacancy rates, economic conditions, and growth prospects, all of which are vital for making an informed investment decision.

You’ll also need to anticipate future trends in the commercial real estate market, such as changes in workplace dynamics, environmental sustainability, and advances in technology.

It’s also important that you’re comfortable with the long-term perspective of commercial property investment. Exit strategies can take longer than residential property, and while tenant demand is often higher and comes with a steadier rental income, it can take a longer time to sell a commercial property when you’re ready to.

Need Help With Your Commercial Property? Book a Free Call with an Experienced Commercial Buyer Agent

Whether you’re ready to start investing in the commercial property market or you simply want more information, contact Revolve Commercial and speak with an experienced commercial buyer agent. We’ll make things as clear and easy as possible, get you on the right track, and start helping your wealth portfolio grow.