When property investors transition from residential to industrial properties, they open doors to a more interesting and promising class of investment. Industrial properties’ simplicity and availability make them a compelling choice.

As the property market shifts and changes, the industrial property segment often leads the way or follows suit, closely tied to the economy and community. This presents a unique opportunity for potential investors.

If industrial property investment is on your radar, it’s crucial to start with comprehensive investigations. These will equip you with the knowledge and confidence needed to find your first industrial asset. Consider the following as you prepare for this exciting venture:

1: Location

Location is everything when investing in any property class. Industrial is high on the location ‘index’. Most towns and cities have ‘industrial’ pockets of properties and industrial precincts for investigation.

When you look at any precinct of industrial activity, look at the roads and services to understand if property occupancy for businesses and tenants could be easy or hindered. Is it easy for business owners to operate from and get their deliveries? Proximity to end markets, highways, main roads, and customers all come into the equation.

Every industrial business will have unique factors to consider in each category. As you look around the location, look at adjoining and nearby businesses to see if there are any conflict factors (environmental or physical). Also, look at zoning regulations and existing property usage to ensure everything is as it should be.

2: Infrastructure

Infrastructure is a key to efficient occupancy operations. Infrastructure could include power supply, water supply and drainage, communication systems and data, lighting, security, fire prevention equipment, emergency response systems, and air conditioning.

A modern industrial building will cover all these issues, but older buildings struggle. Do a SWOT analysis of any industrial property to consider these infrastructure issues. Consider occupancy from a business owner’s perspective to ensure that the property has all the conveniences and connections of property usage and occupancy.

3: Risk Assessment

Do a risk assessment of the property, taking into account the property market trends. That would include vacancy risk, market rentals, supply and demand, the property’s quality and condition, and the economy’s state.

The question is, ‘How attractive would this property be if a new tenant had to be found?’ Consider your property from an occupancy perspective before considering it as an investment. Compare your property to others in the location and look at the regional vacancy rates.

4: Financial Assessment

A comprehensive financial analysis is a must. This includes examining the current income and expenditure, as well as their historical trends over the past few years.

Compare these figures to industry benchmarks, taking into account factors such as vacancy rates, market rents, supply and demand, passing income, lease terms and conditions, and outgoing rates and recoveries.

Seek guidance from an accountant with expertise in property accounting to ensure the accuracy and reliability of the financial data.

5: Lease and Occupancy Documents

Thoroughly review all lease documentation. This task is best handled by a professional who is well-versed in reading and understanding leases and occupancy agreements, such as a property solicitor or attorney.

If the industrial property has multiple tenants, all leases should be carefully examined, as they contain details that can affect both the lessees and the lessor (landlord). Pay particular attention to critical lease dates and their implications for the property owner.

6: Plant and Equipment

Plant and equipment will require a cost and efficiency assessment. The best person to do that is an engineer. They can look at the asset’s serviceable life and the quality of the installed equipment.

It is a fact that the plant and equipment in industrial property must be maintained to building and safety codes in addition to operational capability. That is where the engineer can provide valuable investigations and feedback.

7: Do a Condition Report

Property condition and quality will be the primary investigation for the long-term investment considerations. How serviceable and useable is the property in its current layout? Are there damage factors to look into, and would that be a cost to the lessor?

Create Your List Before Purchasing

These factors will help any investor consider industrial property before making a purchase. When in doubt, ask more questions, take notes and create photographs to record the inspection.