Industrial real estate is an incredibly valuable industry. The property people can invest in within this industry can generate lucrative amounts of profit, so let’s take a look at what industrial real estate actually is.
Understanding what industrial real estate is, can help significantly with investment potential.
What is Industrial Real Estate?
Commercial real estate is usually considered to be offices, shopping centers, and public buildings.
They’re modern, have conveniences for everyday use, and house professional businesses.
Industrial real estate is different. Generally, the areas that people think about are a lot rougher, like factories welding together parts for machines.
This industry plays a pivotal role in society. Nearly all everyday items pass through industrial buildings during their production cycle.
Industrial real estate can be defined in a broad sense as any buildings or land which are designed to accommodate industrial-scale activities. This can include things like research, building, assembly, distribution, or storage.
Types of Industrial Real Estate
There are a couple of different types of industrial real estate areas to think about, and these will all impact the kind of investment that somebody can make.
For one, there is industrial land, which is very simple to use as it is just land that has been designated for industrial use but has no structure on it. For another, you can get Industrial “Build to Suit” land, which is like industrial land, but the landowner pays for the construction of a specific building and then leases it to a company afterwards.
You can also get a bulk warehouse, which is used for storage, a flex warehouse, which is used for a lot of different situations, a heavy manufacturing space, which might be used for a factory, a light assembly space, which is less heavy-duty, a cold storage for goods needing to be kept chilled, industrial showrooms for businesses to display products, and so on.
There are a lot of options on offer.
Industrial Real Estate Classes
As is the case with commercial real estate, there is a grading system in place for industrial real estate buildings to grade themselves for investors to know what to put money and time into.
Class A Industrial buildings are considered the best of the best. They’re in the best condition objectively, are made from high-end materials and can be used for a wide range of situations.
Class B industrial buildings are those which are older buildings or newer ones without modern comforts. Most buildings aren’t built to be Class B – they can wind up this way due to age or being undesirable in the current market. However, their overall quality keeps them relatively high on the grading system.
Finally, there’s Class C. These are buildings that have objectively performed badly and don’t look all that great. They’re not in good condition and are nearly useless from a functional standpoint. They’re not to be invested into.
There are properties listed below Class C, but these are not worth considering in any situation – they are often scheduled for demolition or abandoned due to safety concerns.
Final Thoughts
Industrial real estate can cover a broad range of areas, and it is worth understanding what’s on offer. As an industry, it can be lucrative, but the commitment can be higher financially.
Industrial real estate works similarly to commercial real estate in an objective sense – the grading system is similar and there are equal commitments in some cases.
However, what separates this industry from other types of commercial real estate is the primer use of the buildings.
These kinds of properties require specific equipment and resources to use, and follow rigid building regulations.
