Creative Warehouse Conversions CRE Investors Should Know
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
If there’s one area of commercial real estate that’s extremely popular, it’s warehouses. Whether left in their original condition or converted into a modern retail space, one thing is for sure: warehouses are certainly here to stay.
Are you looking for an exciting addition to your portfolio? There’s quite a bit of information to absorb about warehouses before you dive in, but it is easier than you think to find a warehouse for sale near you. This guide will help you form a solid foundation for all your future warehouse investments.
Why are warehouses so appealing?
In previous real estate cycles, warehouses were seen only as industrial places with very little room for repurposing. That is not the case today, as multiple investors have shown that creative warehouse conversions are indeed possible.
Will you take a warehouse and turn it into a coffee shop? Will it become a combined event and living space, with the living space featuring a loft setup? There’s a ton of room to customize, and even local governments realize that they can relax zoning to accommodate new solutions to make the most out of warehouse property.
Even if you decide not to convert a warehouse for sale near you into true retail space, it can still catch tenants looking to take advantage of e-commerce opportunities. Indeed, e-commerce is growing at a rapid pace, but physical goods still have to be placed in a warehouse. Renting out your warehouse space as a fulfillment center for e-commerce companies is a great way to maximize profits.
You could easily get the best of both worlds by starting with plain warehouse rentals and then moving to convert the warehouse space at a later time after you have a solid war chest in the bank.
Converting Warehouse Space to Other Retail Spaces
The magic in warehouse space is how easy they are to convert into other spaces. However, you can’t take this initiative too quickly. It’s much more important to plan out converting warehouse space. Even if you’re still looking at warehouses for sale, it’s important to imagine how you’ll transform the space.
Here’s what you need to know about converting a warehouse space:
- Start by getting the right construction partners in place. Looking at previous work from general contractors is a great start, as it lets you see what other construction teams have built for their clients in the past.
- Consider what permits are required for the type of business that you’re converting the space into. For example, if you want to run a restaurant inside the warehouse, you have to have the right permits for that business use.
- Crunch the financials. Not every conversion is profitable. Don’t go so overboard on renovations that you end up losing money on the deal.
There are plenty of other points to consider with converting a warehouse space, but keeping these top three in mind will go a long way towards keeping your project profitable.
Tips for Purchasing a Warehouse for Sale Near You
Purchasing a warehouse for sale near you is just like other types of commercial real estate property. Proper planning prevents plenty of problems, but it can be tempting to rush. At times, there’s a feeling of needing to jump on a listing in order to avoid missing out.
Here’s what you need to know to make the right type of warehouse purchase:
- Don’t rush. At the risk of sounding like a broken record, it’s essential to take your time looking at the warehouse for sale listings near you.
- Try to check them out up close if possible. If the listings are in your local area, drive to the location yourself. If you have a chance to walk the property, then definitely add that to your to-do list.
- Ask to look at the financials as soon as possible, especially if the space was rented out routinely. The more information you can get on the property, the easier it will be to make a data-driven decision.
- Decide if you will purchase a warehouse in cash or if you need time to set up financing.
We could certainly put in more tips for you, but the truth is that you want to start with the above tips and then expand outward based on your situation. Bringing another investor or another agent with you that’s skilled with commercial real estate specifically is a great idea, as you’ll have a sounding board that can tell you if the property is truly an investment or a dud.
Starting the Warehouse Conversion Properly
So, let’s say that you’re looking at a recently purchased property, and it’s time to get the conversion going. Here are the best steps to follow:
- All hands on deck. This is well beyond a typical DIY project, as you’ll need to have a solid construction team in place. As mentioned above, look at previous work and get a solid estimate of what the conversion will cost.
- Start looking at the zoning requirements in your specific area. This is also where a commercial real estate attorney can assist, as they have multiple clients that have tangled with zoning issues.
- Look into the marketing aspects that come into play after the completed conversion. Do you already have the right marketing professionals in place to help you either get the specific business off the ground or help you get a renter into the space?
- Decide early on how much you’ll spend on not just the purchase but the conversion in full. Consider that there could be delays and other issues that will change the pricing, so make sure that your budget has some wiggle room.
Good warehouse conversions take time, but they can turn into just about any new space you can dream about, from coffee shops up to full living spaces. If you’ve dreamt about offering new, eclectic housing, this is a great opportunity.
Warehouses are a great entrance into the world of commercial real estate. Even if you already have a few other buildings, there’s nothing wrong with adding more industrial spaces into your CRE portfolio. The tips in this guide are more than enough to help you look through the warehouse for sale listings and make the best data-driven purchasing decision possible.
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