Simply put, industrial real estate development is the process by which companies build structures for business business purposes exclusively. Industrial real estate development companies serve a wide range of business types, from office spaces to busy warehouses. Here is exactly what industrial real estate development entails:
Industrial Real Estate Development Broken Down
Industrial real estate usually falls into three specific categories: small, large, and enormous. Small industrial sites include single or double-story buildings that are zoned for industrial use. Popular businesses that utilize a small industrial property space include start-ups, research labs, and mechanics.
Larger industrial real estate development properties include warehouses and are equipped to manufacture or store merchandise.
Real estate developments that fall in the enormous category are typically used for distribution centers. They hold and distribute finished goods, either to stores or directly to consumers.
Why People Invest in Industrial Real Estate
There are several benefits of investing in industrial real estate. For one, while industrial real estate may be more expensive than residential building, you get the added perk of charging higher rent. Unlike residential properties, industrial real estate development is typically evaluated based on the square meters available. They can offer yields of up to 8%, compared to about 4% on a house.
Additionally, tenants typically lean towards longer leases for industrial properties. This means that you could have consistent rent paid on ten year leases, with the possibility of extending. With a tenant paying rent to you for your industrial property, they’re usually investing in net leases. As a result, the tenant will cover the cost of utilities like water and electricity. This keeps your cost low, and helps you maintain the property with low-stress. Tenants paying leases for industrial real estate tend to be more mindful of the upkeep.
Driving the Demand For Real Estate
As long as consumption of goods and services remains at the forefront of a thriving economy, the drive for industrial real estate development will always exist. Robust industrial buildings are essential for completing business, be it on a local, national, or global scale. One key characteristic of most industrial real estate is its flexibility. Because businesses are regularly expanding or adjusting their needs, they need the infrastructure to keep up with these demands.
Location of Industrial Real Estate Development
Most industrial real estate runs adjacent to one or more of the following transportation hubs: seaports, highway and rail junctions, and airports. As mentioned above, consumers in today’s economy are expecting same or next-day delivery, so major industrial real estate developments want to be closely located to a major mode of transportation for their goods.
More specifically, many thriving industrial real estate developments are located in San Francisco, Denver, Chicago, and Paris. Setting up real estate in populous cities is advantageous because of driving consumer demand of receiving their products sooner.
Investing in the Right Real Estate Development
There are several advantages to investing in industrial real estate. However, it is also important to acknowledge some of the risks. When looking into investing into such developments, remember the risks involved such as a heightened chance of vacancy, the expenses that come with such a large investment, and keeping up with the evolving consumer base, given the shifting economy. However, if you understand these challenges and can address them appropriately, you can reap the rewards.