Repeated lockdowns, the emergence of eCommerce, and the shift from retail stores to warehousing as they “trade bricks for clicks”, has dramatically increased the popularity of industrial properties.
Industrial properties come with a different set of benefits that aren’t as common with other commercial properties. However, to reap these benefits, you will need to take a slightly different managerial approach.
Understanding these differences is crucial for getting the most out of your investment in industrial property and ensuring that everything is managed effectively.
Here are five key differences to help you understand:
1. Tenants
Typically involved in logistics, warehouse or manufacturing, tenants of industrial properties tend to be large, well-established employers with a corporate structure. Having put a good amount of years into their industry, these tenants are acutely aware of their own individual business’s needs and therefore how the property supports their business.
For property owners, this can help simplify the landlord-tenant relationship as it makes problem-solving much more straightforward, as they usually will know exactly what they’re looking for.
To streamline negotiation processes, it’s always best if you take the time to understand the property itself and the tenant’s requirements.
2. Proactive Asset Management
While some property owners might be familiar with issues like blocked toilets, these types of reactive issues are as common with industrial properties however more complex issues also come to light as well.
Instead, these properties require more of a proactive asset management approach. This means regularly visiting tenants and investing time in understanding their business (i.g., when containment shipments come in, etc.)
This “boots on the ground” management, while necessary for managing commercial properties in general, is crucial for industrial property.
Along with making initial negotiations smoother, doing a deep dive into a tenant’s business will help create a long-lasting and trusting relationship. Industrial tenants typically tend to have longer leases, so it is well worth putting in the extra effort and time to build these relationships.
3. Stability
The stability that industrial tenants offer makes them ideal tenants for any property investor.
As these tenants have often invested a lot of time and money in their fit-out, compliance, and developing important health and safety measures, they aren’t eager to move. As a result, leases can be 8+ years long.
Due to the nature of these businesses, they are also typically able to operate through most lockdown alert levels, making industrial properties one of the most stable types of commercial property during lockdowns.
4. Health & Safety
While health and safety is important for any business, it is vital for industrial tenants.
Unlike with other commercial properties, industrial businesses often deal with large shipments and heavy machinery, creating an environment that requires strict health and safety measures.
With various compliance and regulations that they have to adhere to – depending on what products they are storing, handling, or manufacturing – health and safety is something they are invested in for both their business and the property they are tenanting.
When managing these properties, you need to be able to understand the necessary safety measures and be available to support them in this area.
5. Availability
As you’d expect, the benefits of industrial property mean that it is in high demand with investors. Especially with the vacancy of industrial properties the lowest, across all asset classes at the moment.
There is a lack of industrial zoned land, which keeps prices high and has led to fringe industrial areas heating up – such as Penrose, Ellerslie, Silverdale and Hobsonville – and new industrial areas are being created.
Most industrial property transactions happen off-market, and it often comes down to who you know to find out what is available to purchase.
If you are interested in investing in industrial property, let Azure know because we’re regularly in touch with agents and have access to off-market deals.
Azure Property’s Experience
Industrial property is very different from other commercial property types and needs a different, more hands-on approach to managing them. While the benefits of industrial properties are great, it does mean having to put in more time and effort. Luckily, this is where an experienced property manager can help.
One of our founders, Sarah Wrait, has built industrial properties from the ground up, so we understand them inside and out.
This includes how to get the most value out of them, what maintenance issues there could be, and how to make the industrial property work for tenants.
We’ve managed hundreds of industrial properties, so if you want a specialist looking after your unique asset – give us a call.