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.
Longer Leases
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.
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