How to Approach an Investment in Industrial Property

Properties located close to key transport nodes are critical to tenant supply chains and are thus more desirable to occupiers. The 21st century has brought with it significant e-commerce tailwinds and as such, industrial assets located near residential areas are attractive to service the increasing demand for shorter delivery times. Tenants in dense urban areas are often able to afford higher rents, so your return on investment may be largely contingent on the location of the industrial property.

A review of relevant zoning restrictions is important to understanding the future development potential of a site. A low site coverage ratio provides an opportunity to expand the asset in the future and increase the income that is generated. Ensure that you are up-to-speed on any zoning restrictions, and have a clear understanding of redevelopment opportunities and potential restrictions.

Industrial units with an optimal office to warehouse ratio (circa 10:90) and a simple configuration where units can be easily split or divided are often seen as desirable too, as these spaces can cater to a range of tenants.

The flexibility of space is key when appealing to a wider tenant mix and reducing the risk of the space being vacant for long periods.

3. Seek good opportunities

You’ve got to be in to win, so make sure you’re active in the market! This means keeping your finger on the pulse of all activity. There are many ways to do this. Attend auctions (even if you have no intention of bidding), view listings online, read market research, and speak with agents. These are all obligation-free but will be vital in ensuring you’re aware of any opportunities that may arise.

When determining the lease terms, it is important to consider what the average rent is in the industrial property’s submarket. If your property is significantly more expensive than the market rate, it will take much longer to secure a tenant leading to significant loss of rental income during a potential vacancy period and you risk not achieving a favourable outcome when you look to sell the property in the future.

Alternatively, if the current rent received from the tenants is significantly below the prevailing market rates, the property is underperforming and will require active management to bring the current rent to market levels. This will involve taking on additional leasing risk, to maximise returns.

Have a clear picture

When investing in industrial property (or any commercial real estate for that matter), information is key. Speaking with your agents and asking them for advice is important, as it’s best to be fully informed on what’s happening in the market. This gives you the tools and insight to make a profitable investment. To find out more, talk to the team here at JLL today—if you’re in the market, we can help you find the ideal industrial property for sale.