Multi-Tenant Industrial: Is Investment Right for You?

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Over the past year, we’ve seen a surge of popularity in multi-tenant industrial properties. These suite-style properties, which are designed as a mixture of warehouse and office space, are perfect for small business startups. With the spike of entrepreneurial firms emerging over the last five years, many professionals in the industry see multi-tenant industrial properties as a secure investment.

Things to Consider Before Going Forward

Investing in a multi-tenant industrial property can be a smart business move that has a good payout, but there are some things to consider before taking the risk. Before entering into the realm of multi-tenant industrial properties, think about these important factors:

  • Is your area a hotspot for startup companies? Remember, multi-tenant industrial properties are especially popular with entrepreneurs getting established. If your area isn’t home to much new talent, you might be wasting your investment.
  • Companies that lease multi-tenant industrial properties tend to want short-term contracts.
  • One of the benefits that attract businesses to multi-tenant industrial properties is the ability to change workspaces to accommodate their needs. Don’t forget to factor in your tenant improvement expenses.
  • Multi-tenant properties aren’t necessarily recession proof.

With that said, stepping into the realm of multi-tenant industrial real estate doesn’t have to be a gamble. On the contrary, it has a lot of benefits and can be a solid investment choice when done correctly. According to research conducted by Cushman & Wakefield, multi-tenant industrial properties can be an excellent investment move for the following reasons:

  • Multi-tenant distribution centers are outperforming big box commercial properties, and that’s not projected to change anytime soon.
  • At 40%, this sector makes up the largest portion of the U.S. industrial inventory.
  • Yearly, demi-decadal, and decadal performance results are higher than the rest of the commercial property market.
  • Multi-tenant industrial properties gave a 5.3% income return in 2015.

What Makes Multi-Tenant Industrial a Good Choice?

Multi-tenant industrial properties are a practical investment despite being built to be purely functional. It’s this simplicity that has attracted tenants who are looking to get the most out of their lease by saving money and renting out workspaces that best suit their needs.

Additionally, owners leasing out multi-tenant industrial suites don’t have to worry about managing property nearly as much as other sectors. For starters, most contractual agreements have the tenant covering most of the interior maintenance expenses. Furthermore, most of these properties don’t come with common areas that the landlord is required to maintain. This makes multi-tenant industrial properties easier to manage.

If that’s not enough to sell you, consider this: in the future, there may be more demand for multi-tenant industrial properties than we can supply. City landscapes are changing. We’re revitalizing old areas and converting run-down industrial parks into nightclubs, indoor markets, upscale restaurants, and breweries. We’re also creating a demand as a result of building less industrial buildings. This means that jumping into multi-tenant industrial real estate while the prices are still low may be a smart investment choice.

Parting Words

While putting all of your money in multi-tenant industrial properties would be considered a risky move, diversifying your investment portfolio by adding multi-tenant industrial properties can be lucrative.