Industrial property is used for industrial purposes. It sounds simple, but it comes in all shapes and sizes and covers a huge range of business types.
Industrial properties can generally be broken down into three sizes: small, large and enormous.
Small industrial sites include single or double-storey buildings zoned for industrial use. These often have flexible interior space, usually a mix of warehouse and office space. ‘Flex’ spaces are used by small businesses such as mechanics, research laboratories and start-ups.
Large industrial properties include medium to large warehouses and factories that are designed to manufacture or store goods. They include distribution companies such as third party logistics (3PLs).
On the larger end of the scale are the ‘big box’ industrial spaces. These enormous industrial spaces are used as logistics and distribution centers that hold and then distribute finished goods to stores and/or directly to customers. If you think of the type of warehouse Amazon would have, you will get the idea.
Higher rents = higher yields
One of the attractive aspects of investing in industrial property is the higher rental incomes and yields (the annual return on investment) they offer.
Industrial property is usually valued in relation to the square meters available and can offer yields of 8%, compared to say just 4%-5% on a house.
Another advantage is that most industrial leases include fixed annual price increases, which are often linked to CPI.
Industrial tenants are usually willing to sign long lease agreements (up to 10 years in some cases) that provide investors with much greater security than a typical residential lease.