Why Recommend Multi-Tenant Flex Industrial Parks?
As a registered investment advisor, you are in tune with both the stock market and your client’s financial needs. But, with warnings that we may be experiencing a stock market correction,(1) your clients want investment alternatives to diversify their portfolios.
Investing in stabilized, multi-tenant flex industrial real estate can offer a viable alternative. Industrial properties that provide in-place cash flow for investor distributions can be an especially attractive alternative asset class. And, while it doesn’t have the sex appeal of a hot tech stock that can turn investors into overnight millionaires, investor interest in industrial properties is higher than ever, as institutional capital views industrial property as a lucrative investment opportunity. Investment sales were up 34.7 percent last year and there is a resurgence in industrial real estate portfolios.(2)
Why Multi-Tenant Flex Industrial Real Estate
As its asset type indicates, multi-tenant flex industrial real estate is flexible. It varies in shapes and sizes and thus can accommodate different tenant needs. Multi-tenant flex industrial business parks can have both office and warehouse components. The space can be used as distribution facilities, retail headquarters, warehouses, offices, manufacturing facilities and more. And the tech trend toward creating open, collaborative office environments to attract and retain top talent has turned many of these companies to industrial business parks to create their workplace utopia. This flexibility accommodates various types of tenants from a number of industries, allowing for more options when leasing up these buildings.
The explosive growth of e-commerce has dramatically influenced the multi-tenant flex industrial real estate market. (3) The focus of sellers to speed supply chain fulfillment has been a driving force in the increasing demand for warehouse and distribution space, and multi-tenant flex industrial parks have been the beneficiary of this trend.
While some of these trends are driving demand for multi-tenant flex industrial space, industrial real estate is actually shrinking. (4) Limited new industrial construction in urban and suburban areas coupled with many former industrial areas being rezoned, can make multi-tenant flex industrial real estate more valuable from an investor’s supply and demand perspective.
What You Should Look for In Industrial Real Estate
Not all industrial properties are good investments. So, when looking for industrial real estate investment opportunities for your clients, your due diligence may want to include the following questions:
- Is it a stabilized property located in a growing metropolitan market?
- Is the strategy focused on providing investors potential distributions through in-place cash flows on a regular basis?
- What is the potential for long-term capital gains?
- Is the property’s tenant base diversified?
- What is the property’s occupancy rate?
- Is there one large tenant that occupies a quarter or more of the property?
- Was the property purchased below replacement cost?
- What is the sponsor’s track record of acquiring industrial real estate that provides monthly distributions and cash flow?
- What is the strength of the submarket in which the property is located?
- What is the build out of the property compared to current market demands?
Avistone is a commercial real estate investment firm with a successful track record of providing regular monthly distributions to investors of our multi-tenant flex industrial properties. Our investment strategy is to purchase stabilized, multi-tenant flex industrial business parks with high occupancy rates in dynamic metropolitan markets. Further, we look for a diversified tenant base with no individual tenant occupying more than 20% of the space. This strategy boosts the risk return profile for our investors. Our offerings provide the ability for your savvy, high wealth clients to diversify their investment portfolios with the potential for risk-adjusted returns.
More than 45% of our investors have invested in more than one of our offerings. In addition, Avistone principals place their confidence and their own money in each of our offerings. Avistone’s current portfolio of 19 properties includes more than 2.5 million square feet of stabilized flex industrial space located in California, Texas, Georgia, Florida and Ohio.
1) https://www.marketwatch.com/story/heres-the-hidden-stock-market-risk-investors-need-to-watch-out-for-2018-05-22 2) https://www.us.jll.com/united-states/en-us/news/4871/industrial-real-estate-trends-2018 3) https://www.cbre.us/research-and-reports/US-MarketFlash-Room-for-Growth-Industrial-Real-Estate-Cycling-Up 4) https://americas.uli.org/wp-content/uploads/sites/125/ULI-Documents/ET_US-2018_ONLINE_covertext_v8.pdf
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