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Delivering items purchased from online retailers and supermarkets, logistics companies serve the world’s growing population. As a result, this is a growing investment area that provides investors with high payouts and prospects for capital growth during a pandemic.
As the pandemic and the online retail rise increase the tenancy demand for logistics businesses, you may wish to start investing in logistics real estate.
What is industrial real estate?
All buildings that help with production, assembly, warehousing, research, storage, or distribution are part of industrial real estate. Industrial buildings affect the lives of everyone, even though most people don’t go there very often.
Industrial (or logistics) real estate is a key part of the infrastructure that makes it possible for businesses to make, ship, and receive goods.
Although industrial real estate isn’t as appealing as something like multifamily housing, it’s a practical investment that is becoming more important to the modern economy.
Therefore, it would make sense to learn more about investing in this type of real estate and get to understand what a logistics fund can give you. Gaining access to industrial assets never paid off better than today.
Why should you invest?
As eCommerce becomes more important and supply chain problems get more complicated, there is still a huge demand for modern industrial real estate that is far greater than what is available.
Because there aren’t many warehouses in the United States, rents are high and there are record-low vacancies. And according to predictions, extra space in the US will be required in a few years to bring supply and demand closer to equilibrium.
What to look for when investing in logistics real estate?
Two of the most important variables unique to logistics real estate investing are outlined below: the lease and the property itself.
Core real estate
A core real estate asset has been around for a long time, is well-known, and almost always brings in money. Fit-outs and buying new equipment are not needed for these properties, so you won’t have to do much work.
More investors are interested in core and core-plus real estate in the COVID-19 economy. This is because the risk and the capital costs are usually low.
If it’s capital gains you’re chasing, this may be your chance.
The ratio of the size of the land to the size of the building is called the site coverage ratio.
It is hard to define the site coverage ratio, which is also known as the land-to-building ratio. Each renter needs a different amount of space. On several well-known industrial sites, we’ve seen about 50% site coverage.
The best way to figure out what your desired site ratio should be is to find out what renters in your area want.
As we will explain in the next section, logistics tenants want easy access to the site. Because of this, it may be necessary to look for a property with more concrete or hardstand space than building space.
Logistic companies make long-distance deliveries from the warehouse to the customer. This means that a lot of big trucks come in and out of the building.
Truck drivers don’t like to drive on roads that are crowded or narrow. As a result, you should find a property where these vehicles can get in and out easily and that connects to roads that are at least 20 meters wide.
Trucks should also stay away from sharp turns on the property. When a trucker doesn’t have to make a turn to deliver or pick up goods, it makes their day.
If you can find a property with drive-through access, which means that there are roads on both sides of it, that is a huge plus. A building with high roller doors is also a great feature because it works well with the many side loader trucks that are available for leasing.
Logistics companies don’t want their vehicles to have to drive for a long time just to get to the highway. It’s a hassle and a money trap for their company.
A property’s closeness to major arterial links will save your tenant money on freight and transportation costs. This is a big part of figuring out its value.
Logistics real estate investments benefit a lot from having a major road that serves a whole neighborhood. Usually, this is a major road that can handle heavy trucks.
This article will assist you in beginning your search for a solid logistics real estate investment. However, it would be naive to believe that this is all you need to succeed in this investment segment.
If you are new to investing or lack the time to manage the numerous intricacies of commercial property ownership, you may want to consider contacting the experts.