Industrial Property Performance Factors

Many property investors choose industrial property as their first type of property investment outside of residential property. This then shows that the first time or smaller property investors believe that industrial property has key advantages for them.

The main advantage we can see frequently is that industrial property is relatively simple and basic when it comes to property performance. It is not hard for property investors to know what to do and what to control with property rents, leases, and property maintenance.

So what could be some other elements of industrial performance that are worth considering if you were and investor and you wanted to purchase a good property or something with real potential? Here is a list to get you started.

These are the most common points of concern and focus in industrial property that we come across as we speak to many investors, tenants, and real estate agents.

  1. Transport routes to the property and those that are used by a typical industrial tenant must be understood. The routes must be easily accessible as a system of raw material supply and product distribution.
  2. Many tenants need raw materials as part of their business operation. What are these raw materials and how easy is it for the tenant to get them? Look at the access factors for air transport, shipping and port access, together with freeways and the main road networks.
  3. The power to the property should be of the type that industry uses. In most cases that is what we call ‘3 phase’ or ‘high tension’ power. It is the type of power supply that industry needs for large machinery function. If this power is not available you will have to assess how much it will cost to get it to the property.
  4. Cost and supply of labour force is important to industrial tenants. Invariably they will need people to work in the business. Proximity of the industrial property to local residential areas or towns will help with a source of labour supply; however another advantage with this will be access to public transport for the employees.
  5. Moving the end manufactured goods to their market is quite important to the industrial tenant. Today we see reasonable flexibility with truck transport and road networks however some very heavy or bulky goods will need rail heads as a point of distribution. Rail transport still has the advantage when it comes to large volume and heavy goods.
  6. Industrial property investment seems to be strongest in performance around major cities with established growth cycles. Even in a slow economic cycle these industrial properties will perform given the interaction with the community and reasonable access to end markets.
  7. In good property markets the industrial property tends to give higher levels of return when compared to office and retail property. This is an analysis on average so the other elements of location, tenant selection, and market access are still important to the equation. The industrial property market is still robust when economic cycles are positive.
  8. When economic cycles change to the positive, it is the industrial property that responds first even before office and retail property.
  9. Leasing industrial property is basic and simple. Vacancies are easy to manage providing the property is not too special in design that limits tenant usage.
  10. Rents are usually on a net rent basis and the tenants normally take responsibility for the payment of outgoings. In saying that, the landlord needs to ensure that they have a sound accounting process that checks the tenant in that payment cycle. The landlord does not need or want an unpaid account and fines applied thereto.
  11. When the property market is active, the pre-lease market on new industrial property construction is quite strong. It is the timing of the release of newer industrial projects that needs to be carefully managed.
  12. Owner occupation is an element of industrial property performance that moves in cycles. Reading, developing and selling into that property market can be lucrative. This also says that the owner occupiers of industrial property will also sell out of their owned property. Real estate agents can tap into the major businesses to capture this source of new industrial property listings.
  13. When the property market is ‘strong’ the yields achieved on well positioned industrial property at sale time are usually attractive for the seller. This does say that care must be exercised in having good tenants, great leases, great location, and a well maintained property.
  14. Buyers of industrial property come from two sources. That is the investor market and the owner occupiers. This provides versatility in property disposal if one market segment is slower.
  15. Corporate investors will move property in and out of the balance sheet as the company changes and repositions itself for business advantage. Monitoring the media for such changes will give investors a source of opportunity. The process of ‘sale and lease back’ is common in industrial property.
  16. Ample car parking for staff and customers
  17. Good loading and turning areas for trucks
  18. Functional office areas that support the warehouse operation
  19. Generous warehouse height and entry points for trucks and storage
  20. Security for the premises
  21. Access to quality business communication systems including telephone, data, internet, and mobile communications
  22. Good signage at the front of the property that gives the business a clear identity
  23. Proximity to services such as roads, transport, water, gas, electricity, and other industrial tenants.

These elements are the most common that we see in successful industrial property. Whether you be a real estate agent, a property investor, or a business needing a building to occupy, you can start with this basic list and add your special criteria to formulate the profile of a good industrial property in your area.

Commercial Agents – Tips for Qualifying Industrial Property Buyers or Tenants

When salespeople start off their career in commercial real estate sales and leasing they seem to start working on industrial property first. Perhaps that is because the property type is quite simple and basic. That being said, there is still a need to understand the industrial property type and what the prospects in the market are looking for.

Every industrial property should be fully understood before action is taken in listing and marketing the property for either sales or lease. When you completely understand the industrial property it is a lot easier to make the marketing work for you and bring in the enquiry.

So let’s say that you have a property marketing campaign running and you have some enquiry coming in. Asking the right questions of the prospect will help you move ahead in any property inspection if and when it is to occur. To help yourself here you could develop a checklist that you keep by the telephone and with you as you speak to other people and prospects making enquiries.

Asking the right questions will always help you in converting your prospect to an inspection of a relevant property. Here are some questions to help you get started:

  1. Are you talking to the decision maker for that business? Get full contact details and identity before you give out too much information. If the prospect making the enquiry is not open with you, hold back on some of the information regards the property.
  2. What location of property do they require? Does it need to be near a port or transport corridor?
  3. How will the business operate and will they require special factors such as warehouse size and configuration, car parking, office space, showroom, hard stand areas, loading facilities, and the list goes on.
  4. When do they need it? They may have a lead time to property changeover that can impact the negotiation today.
  5. Why do they want it? Most businesses will have at least 5 or more critical factors that must be satisfied if a new property is found for occupation. Getting that knowledge early will help you with narrowing the listing field to more relevant properties.
  6. What are the key requirements of any property that they find and negotiate on?
  7. Seek to understand where the tenant or business is coming from now, as there is likely to be a leasing or sale opportunity waiting in that other property.
  8. Do they need to be near ports, transport, raw materials, or other businesses to successfully run their business today?

When it comes to industrial property, some of these factors will be important to the people that you talk to or that ring off the marketing of industrial property. Add these facts to other regional issues and create a list of items that help build your market share and convert prospects to the right properties.

Industrial property sales and leasing is not hard; it is just specialised and your questions and conversations with prospects should reflect that relevance.

Industrial Properties To Let

For many property investors, industrial properties are the entry point to the commercial property industry. Industrial property is a simple, straightforward type of property with hardly any complexities. The property buyer will need to sort through a few things first before buying any industrial properties to let out again. Stable tenants is a must, so make sure you check out all the potential candidate’s credentials and references before deciding on someone.

Many investors look to purchase and to lease their properties to major industrial businesses under long-term net leases. In long-term net leases, these major business tenants would usually control and pay the property outgoings direct. Property outgoings are usually basic, but there is an essential checking process needed to ensure that the tenant is paying the outgoings on time. The landlord should not just assume that his tenant has automatically been paying the outgoings, otherwise should the tenant have been defaulting this will only cause a big mess for the landlord. Rates and taxes are for the landlord to pay.

As the owner of the property you will need to set achievable rentals before letting your property out. So in order to have a good stab at this, I would suggest you consult with an industrial property broker who will have good knowledge on your business area and will be able to advise you according to the current trends of the market, etc. He will also know more or less what rent you can expect depending on the size of your property and the location of your property and if it is close to access points and if it is easily accessible for the public, etc. when someone is looking for industrial properties to let, they will be looking for certain things as well, such as the location of the property, if it is close to transport links, ports, airports, and rail heads, especially if their business uses these lines of transport.

An industrial tenant will need basic, traditional warehouse space and this should include quality height, size, loading and unloading facilities, quality office space to support industrial operations, plenty of car parking for staff and customers, hardstand areas for operational flexibility, and high levels of security to protect the tenant’s goods and their operation.

Remember, industrial tenants today are more knowledgeable with regards to what they ought to expect from industrial properties and will be more demanding on their selection of industrial properties to let. The investor should therefore select a property that has all the elements of property usage that tenants expect in the local market. Tenants are aware of the fact that the property will have an impact on operational costs and end up affecting the bottom line of their business and so tenants will choose a property well as a consequence.