Pros & Cons of Investing in Industrial Real Estate0

Posted by Thomas Miller, CCIM

miller-industrial-properties-northern-nevada-industrial-subleaseThe savvy investor takes advantage of the long leases, higher yields, and steady returns offered in industrial real estate, which can be sorted into six primary categories based on physical characteristics and use. But before you dive in, weighing the pros and cons of investing in industrial real estate is an important first step.

Investing in Industrial Real Estate – The Pros

There are several valuable benefits to industrial real estate investments.

  • Higher yields – The value of industrial real estate in a given market comes from the number of square meters available to be rented, which means higher rental income. Plus, the normal fluctuations in the market tend to have less impact on industrial real estate. That’s a good characteristic for investors looking for low-risk options.
  • Net leases – The majority of industrial leases are net, meaning longer lease agreements. Tenants are also responsible for many major expenses.
  • Tenant responsibility – As the building’s occupant, your tenant is likely to maintain aesthetics and make repairs quickly, since the setting reflects on the company.
  • Lower turnover – Industrial properties tend to enjoy lower turnover rates than other commercial investment properties. And that means a big cost savings.
  • Facility flexibility – With a range of sizes, shapes, and building requirements, many facilities can be reconfigured to accommodate the needs of different tenants.

Investing in Industrial Real Estate – The Cons

Investments of any kind pose a risk, and there are potential cons when it comes to industrial real estate.

  • Cost – Industrial real estate facilities are large, and square footage alone means a higher initial investment. On the plus side, location will play a role in price, and because industrial buildings are often located outside the city or in industrial areas, they can cost less than comparable buildings in more desirable areas.
  • Staying current – Individual tenant needs, especially in the technology sector, can change quickly. A building that worked just fine only a few years ago may require major renovations to stay current and desirable. Location can likewise be a variable, if newer complexes are built in a different area or communication centers move.
  • Environmental considerations – Industrial properties can be at greater risk of environmental problems and issues, particularly relating to tenant use. This is where an environmental consultant can come in handy.

If you’re considering investing in industrial real estate, northern Nevada is a market worth investigating. The professionals here at Miller Industrial Properties can answer your questions. Contact us today.

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About the Author

Thomas Miller, CCIM

Thomas Miller, CCIM is the president and broker of Miller Industrial Properties in Reno, Nevada. He has worked in industrial real estate since 1991, with 15 years of previous experience designing and building industrial warehousing and manufacturing facilities in the northern Nevada market. Contact Tom at tom@mipnv.com or 775-742-9891.

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