Industrial Real Estate is all land and buildings that house industrial activities, including production, manufacturing, assembly, warehousing, research, and distribution. Industrial real estate is a broad term that covers a variety of properties. Industrial real estate is a comprehensive subset of real estate that includes warehouses, manufacturers, factories, logistics, and distribution. Property used to create or manufacture goods and products, as well as logistics real estate that facilitates the movement and storage of products and goods, is referred to as industrial real estate. These structures lack the appeal of other types of real estate, such as glittering skyscrapers, well-kept multi-family neighborhoods, or bustling shopping malls. Industrial real estate, on the other hand, is critical since it is the backbone of the industrial economy.
Conducting field research and feasibility studies for the location selection for new centers to be established by medium and large-scale industrial organizations and logistics service provider companies, valuation studies for the existing facilities and lands of these industrial organizations and logistics service companies, and preparing development strategies are important. In terms of countries, industrial real estate has an important place in the fields of production, marketing, and business to provide trade within the group. Choosing suitable places for the industrial market is the most important step in this field. In terms of Turkey and other countries, the industrial real estate sector represents the right trade while trade starts with production in the related industry. Industrial real estate investments made correctly lead the company to success in the industrial sector. Companies investing in this field want to make a profit. Some issues need to be decided before the transaction takes place. To make these decisions soundly, an expert investment consultancy company should be chosen. Region selection, transportation point, central point, correct budget, crisis period, and timing factors are the factors to be considered.
What are the Types of Industrial Real Estate?
In contrast, industrial real estate often consists of properties where items are manufactured, stored, and/or exported. There are eight main types of industrial buildings, but the majority of industrial real estate is divided into main three categories: manufacturing, storage and distribution, and flex space.
All types of industrial real estate are listed below:
- Industrial Built-To-Suit
- Industrial Flex Warehouse
- Industrial Heavy Manufacturing
- Industrial Cold Storage
- Industrial Showroom
- Industrial Data Centers
- Industrial Light Assembly
1. Industrial Build-To-Suit
A commercial property tenant enters into a Build to Suit (BTS) agreement with a developer or landowner to create a new, custom-built facility for leasing. The tenant is usually the lone occupant once the project is completed. Because the future occupant determines how they want the structure to be designed to fulfill their business objectives, this sort of agreement provides for the most efficient use of both the land and the facility
2. Industrial Flex Warehouse
Because these warehouses are primarily used to convey goods, their location is critical. You should be in the heart of the country, preferably near an airport, if you want to rapidly get your products anyplace in the country. However, the size of the occupying company can affect this, as well as the design.
3. Industrial Heavy Manufacturing
These massive factories are known for producing heavy-duty items and materials. They often feature tens of thousands, if not hundreds of thousands, of square feet of usable area, as well as heavy machinery, three-phase electrical supply, and enough room for trucks to load up merchandise. Heavy manufacturing plants must be updated when new owners or renters come over since the particular machinery within is usually adapted to the end-user.
4. Industrial Cold Storage
There are two main elements to a cold storage warehouse: the warehouse itself and the equipment inside, such as the racking. There is a third option, which combines both – rack-supported buildings, where the racks are part of the integral structure of the warehouse.
5. Industrial Showroom
Industrial showroom units are functional units that mainly consist of goods and products that do not change hands and do not have over-the-counter transactions.
6. Industrial Data Centers
IT operations are so important for business continuity, they usually incorporate redundant or backup components and infrastructure for power supply, data communication connections, environmental controls (such as air conditioning and fire suppression), and other security systems. A huge data center is a large-scale enterprise that consumes the equivalent of a small town’s electricity.
7. Industrial Light Assembly
These areas are typically much smaller and less complicated than their heavier counterparts. That’s because they’re typically where items are put together from smaller pieces, stored, and then delivered to be sold to consumers. As a result, they’re a lot easier to modify for different renters.
What are Industry Real Estate Classes?
The terms of industrial real estate leases vary depending on the property type and quality. Purpose-built, state-of-the-art industrial manufacturing facilities, for example, typically command triple net leases with initial durations of up to 25 years. Meanwhile, depending on the region, property type, and tenant, lease lengths on logistics properties range from three to ten years.
There are three classes of industrial real estate as listed below
- Class A: These buildings are the newest, have the best amenities, are in excellent condition, are in prominent locations, and attract high-quality tenants. A contemporary logistics complex along an interstate servicing an e-commerce behemoth or a state-of-the-art food production plant are examples of Class A industrial real estate.
- Class B properties are older or run-down, lack facilities found in other properties, are located in secondary or tertiary real estate markets, or are leased to lower-quality tenants.
- Class C: These facilities have the lowest ratings on those aspects, making them candidates for renovation to bring them up to A or B grade, or redevelopment to a different property type like residential real estate or a self-storage facility.
What are the Pros and Cons of Industrial Real Estate?
Investors in real estate must be open about their possibilities, and one of them must be industrial real estate. In this case, industrial real estate can be broadly defined as any property with a storage facility, such as a warehouse, distribution center, or flex space, or that can accommodate a variety of industrial activities, such as a building that can be converted into a production area or a manufacturing plant. In this manner, all possibilities are investigated, potentially improving the odds of closing that one lucrative business that can lead to many. The advantages of industrial real estate encourage real estate buyers to invest in this field.
The following are the pros and cons of industrial real estate types listing:
- Industrial Real Estate is in a Golden Era
- Investing in industrial real estate ensures diversity
- Higher income for longer periods
- Industrial real estate is set for a market correction
- Industrial property is high maintenance
- Longer holdover
What are the Characteristics of Industrial Real Estate?
Industrial real estate has many common features; one is that there are properties on large parcels of land, usually on the periphery of capital cities and close to ports, airports, and major highways, allowing for easy transportation of goods.
Commercial property is divided into three main asset classes. Early industrial real estate includes a wide variety of business types in many shapes and sizes, including mixed-zone buildings containing offices and similar commercial spaces. Second, the industrial property includes slightly lower ceilings and older uses than the other. Third, properties that require immediate repair when rented. But all classes of industrial real estate can be beneficial for you.
How to Invest in Industrial Real Estate?
Companies that invest in industrial real estate want to make profits. Some issues need to be decided before the transaction takes place. To make these decisions soundly, an expert investment consultancy company is applied. Region selection, transportation point, central point, correct budget, crisis period, and timing factors are the factors to be considered. First of all, these factors should be analyzed in detail and an action plan should be made. All these should be rational within the framework of principles. At this point, risk analysis and risk management plans should never be forgotten.
Finding an industrial facility is about identifying the right market. In determining the right market, an investment company specialized in the field of industrial real estate comes into play. Each of these parts is considered one by one, down to the last detail, while analyzing the market. Being able to compete by producing branded products in the world market depends on this. To be able to compete with other countries and to produce products that will meet the consumption needs in the domestic market at an affordable price is to observe the appropriate market in the field of industrial real estate. The expected situation in the coming years is that the industrial real estate sector will develop more.
Valuation methods are very important in terms of investing at the right time and in the right place. The market approach, building extraction, income reduction, and cost method are the techniques used in industrial real estate valuation. In the market approach, organized industrial zones are compared and evaluated. In the building extraction method, land values are calculated in line with some features. In the cost method, an indicative value is determined by considering all depreciation and depreciation in the new production cost calculation. The income reduction method, on the other hand, allows the determined value to be determined by converting the cash flow into a single current value in the future.
Why You Should Invest in Industrial Real Estate?
The establishment of the industrial establishment in the appropriate area and the continuation of its activities create the need for a market area in the real estate field. The owners of the relevant industrial establishments need to know the real estate market in terms of the industry for this reason for their new investments. The selection of suitable places for the industrial market is the most important step in this field. In terms of Turkey and other countries, the industrial real estate sector represents the right trade. Because trade starts with production in the relevant industry. Properly made industrial real estate investments lead the company to success in the industrial sector. It is preferred because companies investing in this field consider profits and the right choices made in this field bring high profits, as it is a long-term solid and major investment.
What are the Benefits of Investing in Industrial Real Estate?
One of the most important reasons to invest in industrial real estate is the need for warehouse space, thanks to the rapid growth of e-commerce shopping and commerce. And besides, the fact that industrial real estate is not subject to lockdowns and border closures comes with certainty and security, especially when it comes to future value.
Another factor is that there is no such law in these areas, as the tenant in the rented house has a clear exit date. Moreover, this type of real estate provides higher long-term financial gains.
What is the Difference Between Commercial and Industrial Real Estate?
Commercial and industrial real estates have the seven key differences as listed below.
- Location of The Building: While there is a more intense and collective working system in a smaller area in commercial buildings, the location in industrial buildings may be in very different places and specific places according to the type of business. Transportation in industrial buildings is planned accordingly.
- Exterior Infrastructure: While there is planning according to environmental and side factors in commercial buildings, there is a direct focus on the product or business in industrial buildings.
- Interior of the Building: In commercial buildings, the inside of the building is designed according to the job definition, while in industrial buildings the building is built according to the job definition from the very beginning.
- System of Internal Infrastructure: In industries, the system is more comprehensive.
- Scale of Construction: While a wide variety of almost unlimited types of work is done in commercial structures, certain business activities are carried out in industrial structures.
- Project Management: While in commercial real estate there is generally a project work on building and structure, this concept of the building is broader in industrial real estate and investment. There can be more than one structure. The area covered by these structures and equipment side activities is the subject of industrial investment. Therefore, real estates are wider and more comprehensive. Therefore, their management is more complicated.
- Permits: In commercial and industrial structures, the permits are the same. However, more work and additional documents are required in industrial structures and investments compared to commercial ones