For some time, industrial property has been the star performer across the national market.
This performance is driven by several factors including demand for flexible, multi-use warehouses, the rise of tradespeople seeking formal premises, and the rise of online retailing.
Ultra-low interest rates are also having an impact. It is now cheaper for many businesses to own rather than lease their industrial premises.
What is industrial property?
Industrial property comes in many guises and covers a vast range of business types. For example, small industrial sites such as single or double-storey buildings are used by businesses varying from mechanics, to research laboratories and even start-ups shifting from a spare bedroom or a space in a garage.
Industrial property also covers medium to large warehouses and factories, which are designed for manufacturing or storing goods, as well as for logistics.
The ‘big box’ industrial spaces are large industrial spaces used as logistics and distribution centres by the likes of Grays Online or Amazon to distribute goods to retail stores and more commonly direct to customers.
What are the benefits of investing in industrial property?
Investing in industrial real estate can be smart business for savvy investors. Given that industrial property is usually valued based on the space available, it can offer yields of 8%, compared to 4% for residential investment.
Another advantage with industrial assets is that most leases include fixed annual price increases that are generally linked to CPI.
Industrial tenants also usually want to stay put for extended periods, so they are typically willing to sign long lease agreements that can be for as long as ten years in some cases. Longer leases provide investors with more security and tenure than a residential lease.
Also, most industrial leases are net leases – in other words, the tenant pays for outgoings such as insurance, water, energy and other utilities, as well as maintenance and repair costs. Better still, if there is a repair issue, the tenant will move fast ensure the damage doesn’t affect their business operations.
If you’re buying or selling an industrial property, contact your local Raine & Horne Commercial office today.