The industrial real estate sector is one of the least explored business opportunities, but if you know where to look and understand how it works, you can achieve long-term success with it. For those who have been meaning to explore this field, this article will help you understand it better by providing information on the key factors you should be mindful of when assessing industrial real estate investments.
Industrial Real Estate 101: How does market dynamics work?
Like every other field, industrial real estate is dependent on the market; as long as you know how to read the data and conduct your own research, you’re bound to encounter industrial real estate opportunities. Here are a few things you should keep in mind:
The economy thrives on market supply and demand.
Business thrives on supply and demand—that much is a well-known fact, but business owners should also develop a keen eye to analyze the current and future relevant industries. Learn to read the data since it can help you identify potential industrial real estate. Along with this, observe and assess the current and previous industrial properties in your target market so you can have an idea of the market’s demand and rental rates. Vacancy rates are considered potential acquisition opportunities, so watch out for this too.
Keep an eye out for economic indicators.
Like every business, there are a variety of economic factors at play that can indicate if industrial real estate will thrive in a certain area. Generally speaking, one sure indicator that it’s doing well is if the overall economic status is thriving, but take the time to check and monitor if it’s consistently pumping job opportunities. Monitor the GDP growth and employment rates too, and if it checks, there’s a high chance it could be a great place to start.
These aren’t the only factors you should consider because you also need to think about the transportation infrastructure: has it expanded or does it plan to expand? What about the railways and ports—have they been a recent addition to the transportation facilities? If yes, it means that the region is continuing to expand. This core foundation can significantly impact the value of industrial real estate properties as well.
Conduct a thorough location analysis.
Site location is one of the most crucial aspects of a business, regardless of what field it is; it can make or break it, which is why site selection must be done thoroughly and through data-driven means. For starters, take time to assess the site’s accessibility: can different modes of transportation—public or private—access it easily? Is it connected to major roads or highways?
Additionally, check the labor force in the area, along with the surrounding vicinity, so you can just locally source skilled labor. Make sure that the site of your choosing also falls within the corresponding zone and dutifully comply with the local zoning ordinances so you won’t be penalized or, worse, forced to choose a different location.