How to Buy a Warehouse for Investment
When you think of industrial real estate, your mind may automatically go to factories, office space, or storage space, and while these are usually pretty safe bets in terms of tenant potential, one space that is equally as sought-after is warehouses.
But why is warehouse real estate becoming such a popular choice for industrial property investors? That’s what we’re going to be looking at today. Below, you’ll find information on why buying warehouse property is such a good investment, along with what you need to consider before you purchase.
Is Buying a Warehouse a Good Investment?
Let’s start by looking at the most important thing any commercial real estate investor wants to know. Generally speaking, warehouse spaces make very good investments, and there are a couple of good reasons why.
Firstly, warehouses are crucial parts of many business supply chains, particularly as online shopping continues to go from strength to strength and the need to store stock grows. Likewise, warehouses act as distribution centers for businesses and allow them to expand while improving their logistics.
This demand means that investing in the warehouse real estate market comes with an almost immediate opportunity for potential tenants, and, with that, comes a steady income of rent.
Another reason why warehouse space is such a good investment is because, over time, the building is likely to appreciate in value. This is especially true if the warehouse property is located in a strategic position with easy access to transport routes.
It is worth noting, however, that while warehouse spaces make good investments, as with any property, location, demand in the area, and economic trends all play a large role in the success of the investment.
What to Consider When Investing in Warehouse Properties
So, what should you be looking for when investing in warehouse property? As with any investment, to get the maximum return, there are some crucial factors to keep in mind before you make your purchase, including:
Location
This is one of the most important things to consider when investing in industrial warehouses, as where the property is located will ultimately dictate the demand for the space.
Look to see if there has been growing tenant demand in the area over the past few years, and do some research to see if other commercial real estate in the area is already occupied. Buildings that already have tenants are likely in an area with high demand for space.
Accessibility
As many companies use warehouse spaces as distribution centers, it’s also important that your chosen industrial property has good access links to key transportation routes, including highways and airports.
This will dramatically increase your chances of renting the property to e commerce companies and create the potential for higher return in the process, as demand is likely to be higher.
Zoning Laws
It’s also incredibly important that you’ve checked the property adheres to local zoning laws and regulations and that, as the property owner, you’re able to lease it for commercial use. Likewise, you should check that the property follows any environmental compliance regulations in place within the area.
Building Condition
Just as you would when investing in retail spaces, residential properties, or any other type of properties, you should organise to have the warehouse inspected for any structural issues. This not only ensures that it meets safety standards in its current condition but gives you an indication of whether any major renovation work would be needed.
Operating Expenses
Think about the kind of operating expenses you may have to face, including ongoing maintenance costs and property taxes. As with any other investment, you’re aiming to make money, not spend it, so the fewer operating expenses you have to worry about, the better.
Remember – we’re here to help you at every step of your commercial real estate investment journey, so if you’re thinking of buying a warehouse, contact us today to talk to our team of experts. Over a 15-minute no-obligation call, we’ll answer all of your questions and give you advice on your next potential steps.
Pros of Buying a Warehouse Space
There are several benefits to warehouse investing, which makes it a good choice for anyone looking to grow or diversify their portfolio. These include:
Steady Rental Income
Investing in warehouses provides the opportunity for a consistent stream of rent, as businesses often prefer to lease a storage and distribution space over constructing and maintaining their own industrial property.
Likewise, you’re also offered a diverse range of tenants with warehouses, as the ‘blank space’ they offer appeals to various industries. In turn, you’re able to mitigate certain economic fluctuations with less risk.
Long Term Leases
Compared to residential properties, warehouses often involve long term leases specifically designed for commercial real estate. This provides long term stability for rental income and reduces the frequency of having to find new warehouse tenants.
Appreciation in Property Value
Warehouses, especially those based in prime locations with excellent transport links, tend to appreciate in value over time. This means that as the demand for storage space rises with economic growth, the property value will increase, and your investment will strengthen.
Tax Benefits
Owning a warehouse comes with certain tax advantages, including tax deductions through depreciation, interest deductions, and potential tax credits. All of these add to the overall financial attractiveness of warehouse investment.
Cons of Buying a Warehouse Space
While there are multiple benefits to warehouse investment, there are also some potential disadvantages you should keep in mind. These include:
Maintenance Costs
Just as with residential real estate, warehouse real estate comes with certain maintenance responsibilities, including general upkeep, repairs, and potential renovations. These are all things that can come with significant costs, impacting the overall profitability of the investment.
Market Volatility
All commercial properties, including warehouses, can be subject to fluctuations in the real estate market, and these changes can affect both property value and rental rates.
Limited Liquidity
Compared to other forms of industrial real estate, warehouses can have limited liquidity as, while they are usually in high demand for rent, purchases can take quite a lot of time. This is especially true during market downturns, so something definitely worth considering before investing.
Need Help With Your Commercial Property? Book a Free Call with an Experienced Commercial Buyer Agent
When you’re ready to get started with buying an industrial property for investment, contact Revolve Commercial and speak with an experienced commercial buyer agent. We’ll walk you through everything you need to know, handle all of the hard work, and make it easier than ever to get your wealth portfolio growing.
Jan Rautenbach
