Nobody Invests in Industrial Properties!

Real Estate Agent with BMC Capital

Really? Nobody invests in industrial property?  That's what I heard.  I was speaking with another investor today.  He is someone I consider quite knowledgeable about commercial real estate in general, but as we were discussing a potential investment he made the comment that, "Nobody invests in industrial property".  He went on to say that only owner users invest in industrial properties.  Well clearly my friend has been misinformed, but I'm guessing that if this experienced investor believed this, that many other people believe this too.  Of course many industrial properties are bought by owner-users, but several are also owned by investors.  I happen to have one client who owns over 40 industrial properties.

I think the confusion may start with a misunderstanding of what actually qualifies as industrial property.  Of course factories, power plants, and refineries fall into this category, but that's not where things end.  In general industrial properties fall into three major categories:

Manufacturing:  These are the facilities that almost everyone could identify as industrial properties.  Many of these are owned by owner occupants, but some investors do purchase manufacturing facilities.

Warehouse:  Many people don't immediately think of warehouses when they hear the term industrial property, but it is.  Many warehouses are owned by investors and rented to end users.  Distribution facilities are also usually put into this category.

Flex:  Flex is exactly what it sounds like; It is flexible space.  It often has multiple uses within the same property.  R&D, showroom, and light manufacturing are often combined with a small amount of retail or office space.

Typically investors who specialize in industrial property will select one of these three categories to specialize in.  Often these investors started as business owner who purchased the properties that they occupied, and moved on to purchase additional properties to rent out.  One investor I know had owned a small trucking company, and slowly started buying distribution centers.  Now his business is owning industrial real estate that he leases to distribution center operators.  With an understanding of the major categories of industrial properties, it is clear that there are several opportunities to invest in industrial real estate.

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