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What Is Industrial Real Estate?

Published: 06-17-22 Category: General CRE

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.

Industrial real estate is a broad term encompassing any type of commercial space that is used for industrial purposes.

An industrial property may serve as the headquarters for a company, store, or production facility.

Often, it is tailored to suit businesses that require large amounts of unobtrusive space for assembly or manufacturing processes.

Industrial properties are often located near major roadways or ports so raw materials can be easily delivered and finished products can be shipped quickly and efficiently.

These properties are also usually equipped with loading bays, drive-in doors and other features designed to accommodate large trucks.

These properties are also almost always cheaper than retail real estate because they are generally located in areas where land is less expensive.

Let’s explore everything you need to know about industrial real estate so you can make informed decisions about your next business venture.

A Brief History of Industrial Real Estate: The Industrial Revolution

The Industrial Revolution saw the rise of modern, mass-production manufacturing in Western Europe and North America.

This led to dramatic changes in the way people lived, worked, and played. It also led to new inventions and ways of doing things.

The Industrial Revolution began in Britain in the late 1700s.

By the early 1800s, factories were popping up all over Europe and the United States. By the end of the century, workers could produce goods much faster than ever before.

In fact, it was this rapid production that led to many new inventions—mass-produced items like sewing machines, crankshafts, steam engines, and electrical appliances.

This created a demand for new materials like iron, steel, rubber, and glass that fueled the Industrial Revolution even more.

This created a need for more industrial warehouses, manufacturing plants, and other facilities.

The Types of Industrial Real Estate Properties

Industrial real estate is a broad category that encompasses all properties related to industrial use, including those used for manufacturing, production or wholesale trade.

These properties can be standalone buildings with just one company leasing them or a campus of buildings leased by several businesses in the same industry.

Some common types of industrial real estate properties include:

Industrial warehouses;
Distribution buildings;
Manufacturing buildings;
Cold storage;
Industrial office space;
Data hosting centers;
R&D Buildings.

Industrial buildings are not just buildings. They are strategic points that impact many areas of business, including industrial office space.

Sometimes industrial buildings are used in multiple ways, such as industrial office space with large industrial warehouses to store and organize inventory.

Industrial Property Class Types

Furthermore, there are some differences in quality between types of industrial properties:

Class A industrial properties are the newest and most state-of-the-art buildings often used by large industry leaders and may include industrial office space.
Class B industrial properties are slightly older industrial properties but often of a good quality.
Class C industrial properties are the lowest quality industrial properties with the most affordable rental rates, often located in less desirable areas.

For commercial real estate investors, any one of these classes can be profitable.

Many investors look for Class B industrial properties that can be renovated back into Class A industrial properties.

How Industrial CRE and Logistics Go Hand in Hand

The Industrial Revolution led to new inventions that changed people’s lives and altered the very nature of our world.

From food, transportation, and communication to entertainment and communication technology stored in industrial warehouses, these are just some of the products that have come from innovations in the field of technology.

The last century’s technological advances in transportation, software design, and information processing have led to some big changes in manufacturing processes, industrial warehouses, and industrial logistics as well, especially with the prevalence of e-commerce.

While the manufacturing and distribution processes in many industries have become increasingly tech-savvy, those involved in these processes still require a lot of space that can be found in industrial real estate.

Why Invest in Industrial Real Estate?

Industrial properties are excellent investments because they are adaptable, high traffic, and have a good return.

Industrial real estate is perfect for investors who want to diversify their real estate portfolios or anyone who wants to start investing in industrial warehouses.

These properties, including industrial office space, can become cash cows when the right improvements are made.

What Drives Demand for Industrial Real Estate?

There are a variety of factors that drive industrial warehouse demand. These include low interest rates, the growth of e-commerce, and a steady economy.

Much of North America’s growing population has led to an increase in the number of goods being produced, which means industrial real estate is particularly valuable.

E-commerce has changed the game for many businesses.

The internet has expanded people’s access to products and made it possible to buy items from different locations around the world.

For industrial real estate investors, this has led to a demand spike for industrial properties.

How to Find Industrial Real Estate Properties

There are many different ways to find industrial properties. It all depends on what kind of property you’re looking for and what kind of budget you have.

You can search online or see classifieds.

If you have a limited budget and are looking for properties in a specific area, it’s best to work with a commercial real estate agent or broker.

These agents can help you find properties in your city or across the country.

A Tried and True Asset Class

Industrial real estate is one of the most historically important classes of commercial real estate.

For thousands of years, people have built factories and industrial warehouses near their employees and resources, as well as near each other to share resources and information.

There are many different types of industrial properties. They range from warehouses, cold storage facilities, and data centers to manufacturing buildings and distribution centers.

These properties can be standalone buildings with just one company leasing them or a campus of buildings leased by several businesses in the same industry.