What Is Industrial Commercial Real Estate?

When most people think of real estate, what comes to mind are homes, offices, or retail stores. Fewer people have a clear idea of what industrial commercial real estate entails. While it might call to mind factories or other assembly plants, industrial businesses can expand much further than factories to include the shipping industry and others.

Industrial real estate is one of three main categories in the commercial property market. One of the asset classes, multi-tenant industrial properties are some of the most versatile and specialist types of all. Anybody interested in commercial real estate investment should know more about the possibilities that this type has to offer.

Defining Multi-tenant Industrial Real Estate

In short, multi-tenant industrial real estate provides properties for non-public commercial use. These are not always open to clients and are often where companies store their inventory or manufacture their goods. The specific uses for this type of real estate are widely varied, ranging from mechanical engineering to scientific research or fulfillment deliveries.

What Is The Difference Between Commercial and Industrial Real Estate?

Retail and office properties are the most well-known commercial real estate assets. In part because they are public-facing, meaning the general public regularly visits and interacts with the building. Unlike these properties, however, industrial real estate is not necessarily open to the public.

Industrial assets mainly engage with companies and large enterprises that use their facilities for manufacturing, shipping, and storing their products. This type tends to also be set apart from other commercial properties, often in a specific industrial section of a city or area. Another key difference is that industrial assets can incorporate pharmaceutical-grade and temperature-controlled facilities as well as automated high-bay warehouses.

Industrial Real Estate Classes

Every commercial building comes with a class grade attached to it. Buildings are often labeled Class A, B, or Class C. When investing in industrial properties, it is important to consider which class best suits your needs and investment goals.

Class A: This type of industrial property is often the newest and highest-quality structure available in the real estate market. Most structures built today are made of materials produced to meet evolving standards in the construction industry. These properties also typically house high-income earning tenants, such as large companies, with low vacancy rates.

Class B: This class typically refers to slightly older buildings but may also refer to new construction that does not feature top-of-the-line amenities. Rental income for this type is usually lower than Class A. The potential for value-add opportunities attracts investors to this type, meaning these properties can be transformed or upgraded to become Class A properties.

Finding a deal on Class B properties is often much more accessible, especially because some investors view these as higher-risk assets. For those investors willing to put in the work, Class B assets can be great for their portfolio.

Class C: The final class is ‘C.’ This refers to buildings 20 years or older, often needing multiple maintenance issues addressed, and sometimes located in less desirable markets. A significant drawback is that rental rates for this type of property are lower than the other two, which makes passive income opportunities more difficult. For any investor willing to put in the time, money, and creativity to revitalize the property, though, this can be an excellent opportunity to increase its earning potential.

In addition to these classes, the industrial sector can be further broken down into categories based on function. These include food-grade manufacturing, engineering and fabrication, transport, and third-party logistics.

The Benefits of Investing In Multi-Tenant Industrial Properties

One of the biggest reasons to invest in multi-tenant industrial flex properties is that this asset class tends to have businesses that require employees to be on-site as evidenced by the steady tenant level through the COVID-19 pandemic. Unlike other assets that faltered after the closures and stay-at-home orders around the globe, the industrial class remained steady due to a sizable increase in e-commerce and trade. Companies found they needed the space to hold and distribute retail goods to meet customer demand.

Along with this sector’s resilience so far in the face of lockdowns and border closures, certainty and security have historically been other attractive benefits to investors, especially when it comes to potential future values. Typically, industrial properties offer low vacancy rates nationally. Significant government spending on infrastructure is also historically highly correlated with industrial property values. In the past, this type had a layover period, otherwise known as a time of vacancy between one tenant leaving and another arriving on the property. Recently, this trend seems to have shifted in favor of demand, with demand in some markets outstripping the local supply.

Investors in industrial assets may also enjoy significant capital growth over several decades if that is a part of their long-term financial plan. This is particularly true in areas considered highly likely to grow or experience change in the coming years. Areas like the Sunbelt have historically featured up-and-coming cities with the potential for better returns and investment opportunities overall.

The Risks of Investing In Industrial Real Estate

No investment is free of risk. Even the most stable are prone to a bit of risk, though they are considered more reliable. Like investing in commercial real estate, industrial properties face the same potential problems and obstacles that could lead to a failed investment.

Still, these may be good assets for investors looking to diversify their portfolios or expand further into the commercial real estate market. While some industrial properties come with a higher bar to entry, many can join through a collective investment venture, such as through a private equity firm, fund, or REIT.

Invest With Avistone

As a real estate investment firm, we specialize in acquiring and operating multi-tenant industrial properties. Since our founding in 2013, we have managed more than 4 million square feet of multi-tenant flex industrial properties in various states.

Our executive management team has over 100 years of combined experience in acquisitions, dispositions, operations, structured finance, appraisal, land use, and asset and portfolio management. We have the unique ability to integrate extensive capital market knowledge with a more “boots on the ground” approach to acquire and operate various properties.

We offer our investors attractive potential yields and potential total returns for relatively low risks. If you want to join one of our funds or work with us, contact us today!

© 2023 Avistone, LLC. All rights reserved.


Communications from Avistone, LLC or its affiliates (referred to together as "Avistone"), whether it is transmitted through its website or any other marketing platform used by Avistone (collectively termed "Avistone Communications") must not be interpreted or meant to 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.

The content provided herein and through Avistone Communications must be reviewed in conjunction with related private placement memorandums and other offering documents to comprehensively understand the risks associated with the securities to which it pertains. Participation in private placements necessitates substantial and sustained financial commitments, the capacity to withstand a complete loss of the investment, and minimal liquidity requirements. Avistone’s website and Avistone Communications imparts preliminary and generalized insights regarding the Investments, intended solely for initial reference purposes. It does not encapsulate or consolidate the entirety of applicable information. The information within is subject to qualification by and subject to more intricate details as presented in the relevant offering materials. Avistone is not registered as a broker-dealer. Avistone disclaims any assertion or warranty to any potential investor regarding the legality of an investment in any Avistone Investments.

Investments in securities or real property involve inherent risks and are exclusively available to accredited investors, as defined in the Securities Act of 1933, who comprehend and willingly assume the elevated risks associated with private investments. These risks encompass, but are not confined to, market fluctuations, credit vulnerabilities, interest rate exposure, and the prospect of partial or total loss of invested capital. Prior to investment, one should: (1) conduct an independent investigation and assessment; (2) meticulously evaluate the investment along with all concomitant fees, expenditures, uncertainties, and risks, including those stipulated in the offering materials; and (3) consult with individual investment, tax, financial, and legal consultants.

The content presented in Avistone Communications is neither intended as a recommendation nor a form of investment counsel, nor does it signify an entreaty to procure, vend, or retain a security or investment strategy, and it is not imparted in a fiduciary capacity. The information provided does not factor in the specific goals or circumstances of any given investor or propose any particular course of action. The information reflects Avistone’s interpretation of the prevailing market milieu. The viability of achieving the objectives of any Avistone fund or investment, or averting substantial losses, cannot be ensured. Investment determinations must be formulated on the basis of an investor’s individual goals and circumstances, and in collaboration with their financial professionals. Historical performance is not indicative of future outcomes. All research and supplementary information supplied through Avistone Communications is crafted exclusively for informational purposes, and Avistone assumes no accountability for any inaccuracies or omissions within the content of this website or any linked resources.

All approximated financial and investment benchmarks, inclusive of forecasted internal rate of returns (IRR), yields, multiples, and investment holding period returns, as displayed on Avistone Communications, stand as conjectural projects of performance exclusively, are hypothetical in nature, are not to be regard as actual investment outcomes, and do not present guarantees of future results. Such approximated benchmarks are invariably accompanied by intrinsic risks, encompassing but not restricted to market volatility, operational ambiguities, and limited liquidity, and do not signify or assure the real outcomes of any transaction; and no assertion is made that any transaction will, or is likely to, attain results or profits akin to those depicted. Moreover, additional financial metrics and calculations shown on Avistone Communications (including amounts of principal and interest repaid) have not undergone independent verification or audit and may diverge from the actual financial metrics and calculations realized for any investment. The investment data contained herein is sourced from entities Avistone believes to be reliable, yet no assertions or warranties are made as to the accuracy or comprehensiveness of said information, and no responsibility is accepted for the same.

Avistone’s historical track record showing past performance is no guarantee of future results. The performance of Avistone’s prior projects have not been audited by any third party. Not all investors received precisely the same returns due to differences in their respective commitment dates for individual 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 investments, weighted by the respective capitalization amount for each Full Cycle Investment.

Investments in private placements are speculative and involve a significant quantum of risk, and those investors whose financial situation cannot withstand a complete loss of their investment should abstain from investing. Moreover, investors may receive securities with limited liquidity and/or constraints on transferability, subject to specified holding duration prerequisites and/or concerns about liquidity. Investments in private placements inherently entail a high degree of illiquidity, and investors with an inability to retain an investment over the long term (at least 5-7 years) should refrain from investing. Real estate and alternative investments should only constitute a component of a broader investment portfolio.

Private placement investments are not equivalent to bank deposits (and consequently lack FDIC insurance coverage or safeguarding by any other federal government agency), are illiquid, are not endorsed by Avistone or any other entity, and may depreciate in value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or endorsed any investment, or authenticated the accuracy or exhaustiveness of any information or materials furnished via Avistone Communications. Investors must be financially prepared to absorb the complete loss of their 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.