Why you might want to bet on Industrial Real Estate?
While many people consider commercial or residential real estate to be the most common investment options, industrial real estate can provide unique benefits and advantages that make it an appealing choice for savvy investors.
Property that is used for industrial purposes, such as manufacturing plants, warehouses, distribution centres, and logistics hubs, is referred to as industrial real estate. These benefits are critical for businesses that must store, manufacture, and distribute products. Industrial real estate is typically located near transportation hubs, major highways, and airports, allowing businesses to easily transport goods and materials.
Let us walk through a few reasons that make industrial real estate an attractive investment option-
1. High Demand- Because of its versatility in a variety of industries, such as manufacturing, logistics, and distribution, industrial real estate is in high demand. The rise of e-commerce is also a major contributor to the rise in demand because the demand for warehouses, distribution centres, and logistics hubs is expected to rise as more businesses shift their focus to online sales. Investing in industrial real estate can allow investors to capitalize on this trend and hit the jackpot by generating long-term returns.
2. High rental yield- The potential for high rental yields is one of the most significant benefits of investing in industrial real estate. Don't we all want to put our money in places that fetch us lucrative returns? In contrast to residential properties, which typically have rental yields of around 3-5%, industrial properties can have rental yields of 10% or more. This is due to the high demand for industrial properties, particularly in areas where suitable properties are hard to come by.
3. Steady Income- Typically, industrial properties are leased for longer periods of time, ranging from 5 to 10 years or more. Through these long-term leases, investing in industrial real estate can provide a stable and reliable income stream for an extended period of time. Many industrial tenants sign multi-year leases, giving investors consistent, long-term and predictable cash flow. Once it is leased out, you can take a breather for some years!
4. Low Vacancy- Vacancy rates in industrial real estate are pretty lower than in other types of real estate, such as residential or commercial properties. This is owed to the specialized nature of the properties, which makes it very less likely that tenants will relocate or new supply will enter the market. This ensures consistent income for investors and mitigate the risk of vacancy-related losses, which is a major and genuine fear when leasing out a property.
5. Diversification- The holiest rule to investing is to never put all the eggs in one basket. Industrial real estate investing can help diversify your investment portfolio. and reduce the risk ensuring that your portfolio is not overly reliant on a single type of investment. Industrial real estate also frequently outperforms other asset classes, such as stocks or bonds, which can help lower overall portfolio risk.
6. Low Maintenance- Industrial real estate is a very low maintenance investment avenue because industrial properties are built resilient enough to withstand heavy use, hence, they are less prone to wear and tear. Furthermore, tenants are typically responsible for property maintenance, which means investors can benefit from lower maintenance costs.