Industrial property is the entry point for many property investors to the commercial property industry. As a property type, industrial property is relatively straightforward with little complexity. The property owner just needs to target and strategise the following issues when looking for a property to buy:

  • Stable tenants
  • Achievable rentals
  • Good property location
  • Industrial property precinct
  • Growth of the local community and business sector
  • Vibrant industrial community supplying services, products, and raw materials
  • Access to transport links, ports, airports, and railheads

So now let’s look at the industrial property needed today by tenants.

What do Industrial Tenants Need?

Traditional warehouses will include quality height, size, loading and unloading facilities, quality office space to support industrial operations, ample 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.

Industrial tenants today are far more sophisticated and demanding when it comes to selecting a property to lease or buy. The investor should therefore select a property that has all the elements of property usage that tenants expect in the local market. Tenants know that the property will impact operational costs and eventually the bottom line of their business. Tenants will choose their property well as a consequence.

Taking the First Step to Investment in Industrial Property

Industrial warehouses are simple to construct and have a long economic life hence the investor sees it as an entry-level investment vehicle and popular. Providing they select a sound and strong tenant, and apply a good lease, the stable future of the property for investors is normally achievable.

There is very little management required on industrial property, and as direct result many private investors will manage industrial property themselves. Unfortunately this does have negative connotations, in that the first time investor sometimes has little awareness of the specialist terms and operational conditions that is supported by lease documentation on their property.

These first time investors can then overlook critical matters and make mistakes. To the experienced commercial property specialist and commercial real estate agent, it is easy to see these ‘first time’ landlord managed properties as you drive through a town or city. The errors of ownership are visually obvious. These errors can even reflect in the ultimate levels of rent and price on the property.

Invariably and importantly this self management problem will surface at final sale or rent review time when the investor has overlooked something or transacted it incorrectly. The buyers of property today will conduct a due diligence period and investigation of any property prior to settlement.

Those property owners that manage their own investments should only do so only when and if they completely understand the complexity of the task at hand. If the investors have only a basic understanding of property performance and function, then they should not self manage the property. The matter is plain and simple.

Critical property knowledge will involve key functional elements such as:

  • Types of rental
  • The lease clauses and provisions
  • Property maintenance strategies
  • Property operational costs
  • Contractor management
  • Vacancy resolution and strategy
  • Incentive use and strategy
  • Tenant negotiation skills