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Is Industrial Real Estate Investment Right for You?

The answer is probably “Yes!”

When it comes to real estate investment, industrial properties may well be the most out-in-the-open secret there is. Very often, investors overlook these locations. They’re not as sexy, say, as a beautifully appointed residential property or a commercial property with a fashionable address.

No, industrial properties are working properties. They’re all about docking and loading, storage and distribution, manufacturing and shipping. Nevertheless, they are an excellent option for the more entrepreneurial investor.

What makes industrial properties appealing?

When it comes to properties, those in the industrial sector are the least management intensive, depending on the size of the property. For the investor looking to be more hands-on and not requiring the services of a third-party property management firm, most industrial properties only require one or two visits per month in order to check on tenants.

While many office complexes and even residential properties require the investor to renovate properties several times over the course of ownership years, industrial properties tend to need very little cosmetic upkeep. Industrial tenants, in fact, tend to be willing to pay for a few key assets:

  • Wide loading areas;
  • High dock doors;
  • 28’ to 30’ ceiling heights;
  • A state-of-the-art fire sprinkler system and security.

Why industrial and why now?

Looking at numbers from 2017, commercial sales were either flat or down in many markets. Industrial properties, on the other hand, saw an uptick. That upward trend is expected to continue, particularly in South Florida. In a review of ports with year-over-year growth, Miami was in the top 10.

Helping to drive this is the explosion in e-commerce. As more and more consumers shop online, there is a greater need for localized distribution centers to meet delivery guarantees. In addition, many retail upstarts find it more cost effective to store merchandise in a warehouse and to sell online than to afford the rent in a traditional brick-and-mortar retail building.

At the same time, rents in class-A industrial properties – usually newer construction and located on the outer fringes of urban areas – are skyrocketing. Many potential tenants need more affordable places; in other words, class-B buildings, of which there is an abundance. Many of these are centrally located in urban areas that are close to potential consumers, and only need simple upgrades to make them palatable for today’s tenants.

Why is Miami a rising industrial star?

In a comparison with three other industrial markets – Seattle, Northern New Jersey, and Oakland, CA – Miami has made major gains for a few key reasons:

  • That old real estate cliché – location, location, location – holds true. Because of South Florida’s close proximity to the Caribbean, it serves as a gateway for trade with Central and South America, as well as the islands.
  • Miami and the surrounding region are predicted to see a continuing rise in population. By 2020, the number of residents is expected to surpass 6.2 million. This population surge, along with e-commerce, is credited with the 4% increase in retail sales in the area.
  • All of this has translated into positive growth in the industrial real estate sector. When compared to the other markets, Miami has seen 35% industrial rent growth since 2010. At the same time, current and planned construction projects are expected to add 1.2 million square feet of leasable industrial space per year. Speaking of leases, Miami often leads the pack for signed smaller industrial leases. That has since changed – 40,000 to 70,000 square feet is not the typical signed lease.

Morris Southeast Group and the industrial market

As South Floridians, the professionals at Morris Southeast Group live, work, and play in a market that’s leading the way for the rest of the nation. We have access to an assortment of industrial, retail, and office properties to add to your investment portfolio, as well as matching tenants for the right property plus property management services.

For a free consultation, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

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