Did you know that there are more warehouses in America than ever before? This is not much of a surprise if you know that warehouses process almost everything in the United States supply chain.
Warehouses are a type of industrial commercial real estate that many investors have their eyes on, and for good reason too!
Investing in warehouses and generating income through a warehouse for lease is a great business endeavor. Keep reading to learn why you should consider warehouses as a business investment.
In commercial real estate, a property that falls into a certain category must be used for that purpose. For example, an office can't be bought and turned into a multifamily property and vice versa.
Industrial property, however, has many uses. Investing in warehouses offers the unique opportunity to fluctuate the use of the structure to match the changing market demand.
Demand for warehouses might be low in one area, but that same area may have a need for storage facilities. You can advertise an industrial property as either.
Because one property can have multiple uses, a broader range of businesses might be interested in leasing. One large warehouse building can even be sectioned off into various spaces for production, offices, storage, etc.
Due to the diversity of warehouses, they tend to have lower vacancy rates than other types of commercial real estate.
Demand for industrial properties like this stays high because every product passes through an industrial property in one way or another. For the economy's sake, properties like this are indispensable.
As e-commerce continues to take off, there is a larger need for full-scale fulfillment centers.
Different Warehouse Types
Before you can put up a warehouse for lease, you need to find warehouses for lease. Luckily, there are a lot of options to choose from. Some of the most common warehouse types are:
- e-Commerce fulfillment warehouses (distribution centers)
- Manufacturing warehouses
- Public warehouses
- Storage warehouses
- Private warehouses
- Climate-controlled warehouses
Leasing a warehouse can often be a great business move, and one of the best ways to make it profitable is to market it based on its unique features. If a warehouse is positioned particularly close to desirable resources or amenities such as transportation hubs, shopping centers or other destinations, highlighting those features in marketing materials can help convince potential tenants to choose your property over others. It helps to give your warehouse an edge in the competitive commercial leasing market by emphasizing specific factors that make it stand out from competitors. It's also worth noting potential security considerations like alarm systems and video surveillance for peace of mind for tenants. By showcasing these types of differentiating features, you can help ensure maximum efficiency when leasing out your property.
Not every business investment is a good idea, but investing in a warehouse can generate long-term income. A property that remains vacant will never benefit the investor. Warehouses with low vacancy rates can steady business income.
A warehouse lease is typically longer than a general commercial lease. This is because moving an industrial business from one location to another is a huge hassle.
Tenants are more likely to renew their lease as opposed to packing up and relocating. As the investor and owner, you have the final say in if you want to offer tenants a new lease once the original lease is up.
High Rental Yields
Rental yield is referred to as the difference between the income an investor receives from renting out a warehouse minus the overall cost of the investment. Therefore, high rental yields are a great thing.
Traditional office spaces and retail spaces only generate about 5-6% of returns. Industrial real estate tops both of these spaces.
Rental yields in the industrial industry can be up to 7.5%. It's a clear choice when it comes to investing in commercial property that warehouses are the way to go for a higher rental yield.
The downside to owning commercial real estate property is that it usually comes with a lot of overhead. To maintain the property, owners need to make repairs, upgrades, and renovations when necessary.
Not only are these time-consuming tasks, but they are costly, especially for larger properties.
However, industrial real estate works a little bit differently than the average commercial property. The maintenance required for warehouses is much less than in other sectors.
Most industrial warehouses are big areas with open concrete flooring and high ceilings. The need for costly items like soundproofing, flooring, high-end fixtures, and other expenses is eliminated or reduced.
Because tenants tend to stay longer in warehouses, they are a lot more responsible. Plus, maintenance is simple so they have the incentive to keep the place in good condition.
Less Market Saturation
A saturated market is one where a substantial portion of those likely to lease out real estate has already done it. Industrial property investments come with less market saturation risk.
Warehouse investors shouldn't have to worry about too many properties being available compared to the demand in the market.
If consumers keep buying products, there will always be a need for industrial warehouses. This makes industrial spaces a safer investment option.
Easy to Liquidate
Because of all of the benefits that come with owning a warehouse, you are less likely to find yourself in a situation where you are unable to find a buyer if you ever want to sell.
Industrial properties continue to be in high demand so they stay on the market for shorter periods. Selling a warehouse is a quick and easy way to get some cash compared to other real estate investments.
Do You Have a Warehouse for Lease?
If your business is looking for investments that can generate long-term, steady income, buying a warehouse is a great option.
Compared to traditional commercial real estate investments, industrial warehousing comes with more advantages.
When you have a warehouse for lease, you benefit from the diversity of use, high demand, high rental yields, and much more.
If you can't find a warehouse for sale that you want to invest in, consider building a warehouse to meet your needs.