Many property investors are attracted to investing in industrial property because it is easy to understand.  The tenant, the lease, and the property are quite straight forward from an investment perspective.

It is also worth noting that many commercial real estate agents ‘cut their teeth’ in the industry by working firstly on industrial property sales and leasing.  The basic nature of the property is easy for them to grasp and negotiate on.

Some commercial agents will like the industrial property type so much that they may stay with the segment of the market and become true ‘specialists’ in an area.  If that is the case they will usually rise to the higher end of industrial property sales and leasing in both size and value.  There are plenty of large companies and industries looking for specialised assets for the business growth of their company.

So here are a few more observations about industrial property today:

1. Take care when it comes to industrial properties that are created for a specific industrial use and tenant.  They will generally have a high liquidity factor and be hard to move when the property is to be sold.
2. Special purpose or single purpose industrial properties will be difficult to lease (or sell).  As a case or example in point, large cold storage industrial properties are so specialised that an investor would (or should) want a high yield and long lease with a ‘blue chip’ tenant before the property was considered a wise purchase.
3. This property type is usually the first to be impacted when the national economy and business sentiment is under pressure.  That being said, industrial property is usually the first to respond when the economy is improving.
4. The premises and buildings are easy to manage.  The leases are basic and straight forward in most circumstances.
5. The rental structures in industrial premises are usually a type of net rent.  The tenant will usually pay most if not all outgoings.
6. Capital expenditure in an industrial property will be impacted by property use.  The property owner should get a depreciation schedule of all capital items so they can plan the larger expenditure of capital items that may arise in the future.
7. The zoning of the property and premises will have direct impact on use and therefore tenant occupation.  Ensure that the zoning offers sufficient flexibility for property occupancy and returns.
8. Industrial premises are frequently a single tenant and single occupancy issue.  The facts are easy to understand and tenant mix is not a problem as it would be by comparison in a retail property.

When you look at overall property performance, consider the growth potential in rental as well as the growth in capital appreciation.  The two factors are not always linked and may be impacted by locational factors.