10 Compelling Reasons to Consider Investing in Industrial Real Estate

By Richard Kent | Sep 01, 2023 Industrial Real Estate Investing
Start Investing In Commercial Real Estate

When considering real estate investments, a wide array of asset classes awaits discerning investors. While multi-family, retail, and self-storage typically dominate the conversation, an often overlooked and yet increasingly attractive option emerges: multi-tenant industrial real estate. This asset class offers many benefits for investors seeking to diversify their portfolios, generate steady income streams, achieve capital appreciation, protect against inflation, and optimize risk-reward parameters.

Multi-tenant industrial properties, which are typically comprised of wide, single-story concrete buildings with roll-up doors and a combination of front-office and warehouse space, boast a remarkably diverse tenant base, including e-commerce enterprises, last-mile distribution centers, retail fulfillment hubs, robotics assembly, light manufacturing firms, the construction trades, tech startups, and food preparation facilities.

Below, we present 10 compelling reasons that we believe make the inclusion of multi-tenant industrial real estate into your investment portfolio a prudent decision:


1. Attractive Risk/Return Profile: While lacking the glamour of soaring glass towers or modern mixed-use developments, our experience is that industrial real estate historically exhibits fewer volatile market value swings during economic downturns when compared to other property types.

2. Streamlined Management: Industrial real estate leases often operate on a triple net basis, with tenants responsible for property operating expenses and a significant portion of interior maintenance costs. Additionally, janitorial services and maintenance of common areas are typically minimal, simplifying property management and lower operating costs.

3. Lower Ownership Costs: Re-tenanting industrial properties tends to incur lower costs compared to other commercial property types. For instance, our experience finds that tenant improvements for multi-tenant industrial properties are up to five times less costly per square foot than re-tenanting office spaces.

4. Flexibility of Use: Industrial properties offer diverse configurations, allowing for flexible adaptation to tenant needs. These spaces can range from warehouses with minimal office space to those with a significant office component for distribution purposes. Moreover, with appropriate zoning, industrial real estate possesses greater flexibility compared to other commercial property types.

5. Diminishing Supply: A growing urbanization trend in the United States has led to the conversion of older industrial buildings into trendy nightclubs, chic lofts, apartments, and collaborative office spaces. Simultaneously, new industrial construction in urban and suburban areas remains limited. As former industrial zones are rezoned, space availability for suppliers and distributors decreases, potentially driving up the value of industrial properties in these areas as businesses prefer proximity to urban centers.

6. High Replacement Costs and Barriers to Entry: Developing new industrial projects incurs substantial expenses, primarily due to the high costs associated with land acquisition and entitlement. Although industrial properties are typically single-story and relatively cost-effective to build, they require significantly larger land areas compared to vertical projects like offices, multi-family residences, and hotels. Consequently, municipalities may not perceive the same tax revenue potential from industrial development, potentially exerting upward pressure on rental rates and appreciation of existing industrial properties acquired below replacement cost.

7. Evolving Employment Landscape: According to the SBA, small businesses with fewer than 50 employees currently drive 40% to 50% of job growth in the United States, a trend expected to persist in the foreseeable future. Many of these enterprises are likely to seek expansion within multi-tenant industrial projects and business parks.

8. Surge in Internet Retail: E-commerce, a rapidly expanding segment of the economy, now accounts for 30% to 40% of industrial real estate demand, according to the National Association of Industrial and Office Park Owners. With e-commerce projected to represent one-third of all retail sales within 15 years, traditional brick-and-mortar stores will increasingly shift operations to industrial properties, primarily warehouses, and e-commerce fulfillment centers.

9. The 3D Printing Revolution: As the business world eagerly anticipates the transformative potential of 3D printing, reputable publications such as Forbes Magazine and The Economist are hailing it as “The Next Industrial Revolution.” This burgeoning technology, expected to extend far beyond personal applications, is set to drive explosive growth in the industrial sector over the next decade. As a result, industrial properties are primed to house the flourishing 3D printing industry. Moreover, the impending surge in industrial robotic manufacturing and assembly, widely reported by industry experts, will directly impact the landscape of industrial real estate.

10. Home Building and Construction: The construction industry, a key tenant segment of industrial properties, stands to play a vital role in their continued success. Avistone, LLC (“Avistone”), a prominent industry player, recognizes the potential for expanded activities in crucial sectors such as new residential construction, alternative energy infrastructure, and the renovation of aging roads, bridges, and utilities. These developments are poised to generate a positive ripple effect, bolstering the value and demand for industrial properties. With a strategic focus on regional markets exhibiting these robust economic drivers, Avistone positions itself to capitalize on these promising opportunities.


Invest With Avistone Today!


For the investor looking to get into industrial real estate investments, consider going with Avistone. We are a growing real estate investment firm specializing in capturing opportunities in the multi-tenant industrial market. Our executive management team has years of experience in the business and is well-versed in everything from acquisitions to asset and portfolio management.

Over the past decade, Avistone has completed full-cycle investments on 24 industrial projects encompassing 4 million square feet, surpassing industry performance benchmarks such as the NCREIF Property Index for Industrial Properties. Avistone’s previous multi-tenant industrial fund delivered a commendable 20.24% Internal Rate of Return (IRR) and 9.15% cash distribution yield over a 3.01-year holding period. *

Avistone LLC has also recently launched its latest offering, Avistone Industrial Parks III, LLC.


© 2024 Avistone, LLC. All rights reserved.

*IMPORTANT DISCLOSURES:

Communications from Avistone, LLC or its affiliates (referred to together as "Avistone"), whether it is transmitted through its website, social media, email, text or any other marketing platform used by Avistone (collectively termed "Avistone Communications") must not be taken as recommendations or endorsements to purchase, sell, or hold any securities. Furthermore, Avistone Communications should not be considered as advice related to investment, taxation, finance, accounting, legal matters, regulations, or compliance.

To gain a comprehensive understanding of the risks associated with the securities mentioned herein or in Avistone Communications, it is essential to review them with related private placement memorandums and other offering documents. Participating in private placements requires substantial financial commitment and the ability to tolerate a complete loss of the investment. Avistone Communications provide a preliminary overview and insights into Avistone sponsored investments, and are intended for initial reference. However, they do not encompass all relevant information and should not be considered a complete representation. The information presented is subject to further updates without notice and qualification as provided in the relevant offering materials. It's important to note that Avistone is not registered as a broker-dealer, and Avistone does not make any claims or warranties regarding the legality of investments in Avistone sponsored investments ("Avistone Investments").

Investing in alternative securities or real property carries inherent risks, are illiquid, may depreciate in value, and is limited to accredited investors under the Securities Act of 1933. These risks include market fluctuations, credit vulnerabilities, interest rate exposure, and potential loss of capital. Before investing, all prospective investors must conduct an independent assessment, evaluate fees, uncertainties, and risks outlined in offering materials, and consult with investment, tax, financial, and legal advisors. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or endorsed any Avistone Investment, or authenticated the accuracy or exhaustiveness of any information or materials furnished via Avistone Communications.

The information in Avistone Communications is not a recommendation, investment advice, or a solicitation to buy, sell, or hold any security or investment strategy. It is not provided in a fiduciary capacity and does not consider an individual investor's specific goals or circumstances. The information reflects Avistone's market interpretation, and the success of Avistone Investments is not guaranteed. Investment decisions should be based on individual goals, in consultation with financial professionals. Past performance does not predict future outcomes. All research and supplementary information in Avistone Communications are for informational purposes only, and Avistone assumes no responsibility for inaccuracies or omissions in the content or linked resources.

The financial and investment benchmarks, including forecasted internal rate of returns (IRR), total return, distribution yields, multiples, and investment holding period returns, displayed on Avistone Communications are projections, subject to change and should not be considered as actual investment outcomes or guarantees of future results. These benchmarks always come with inherent risks, such as market volatility, operational uncertainties, and limited liquidity. Additionally, financial metrics and calculations within Avistone Communications have not undergone independent verification or audit and may differ from actual financial metrics for any investment. The investment data provided is sourced from entities believed to be reliable, but no assertions or warranties are made regarding its accuracy or comprehensiveness, and Avistone assumes no responsibility for any inaccuracies.

Avistone’s historical track record in the industrial sector showing past performance is no guarantee of future results. The performance of Avistone’s prior industrial projects have not been audited by any third party. Not all investors received the same returns due primarily to investments in different property offerings. Full-Cycle Track Record average metrics are based on weighted averages that treat investment dollars equally and are calculated after summing the results of all Avistone full-cycle industrial investments, weighted by each investment's respective capitalization amount for each Full Cycle Investment.

Materials or data emanating from third-party media external to this domain or Avistone Communications may address or refer to Avistone or correspond to information contained herein, however, Avistone does not extend endorsement or accountability for such content. Hyperlinks to external sites or reproduction of content from third-party sources do not denote an endorsement or approval by Avistone of the content thus linked or reproduced.