For a real estate business, there are a number of ways that implementing high tech gadgets and the latest and greatest technology in the office, will benefit your overall business productivity. These types of technological upgrades can make employee work life easier, smoother and can increase efficiency. This will in turn improve the quality of work being done and leads to higher chances of success; this equates to more money as well.
How can you use upgraded technology to increase employee efficiency, productivity and overall business success? Continue reading for a number of examples.
Real estate in general can use their own website for so many different reasons; advertising services, showing commercial real estate properties available, contact information for potential clients and more. A good website entices visitors to contact the business for the services that are advertised. It displays professionalism and seeing a good website makes people think your business must be doing well. There is an increased chance that visitors will trust in a company or business with a well-built website, because it also makes people think you have enough resources to spend the money on a well-functioning, high quality website. In addition, a website that encompasses a good user experience lowers the chance of visitors becoming frustrated or not finding what they’re looking for and navigating elsewhere for service. This is important in terms of having a positive online presence. Having a good online presence involves having good technological resources. A business will need to have good web designers involved, which also requires web design programs and software available to employees. This involves good quality computers and space designed for these types of employees.
Also, having resources who specialize in search engine optimization and ensuring the website shows up in Google search results will greatly increase traffic which eventually leads to company success. There is specific educational experience that is involved with employees being successful marketing specialists; this usually involves a number of years of experience and knowledge of marketing tools. The more opportunities the website has to appear across multiple platforms increases online presence.
Marketing and Outreach
If a company has the best in technology, they can increase the performance of both their webpages and the quality of their resources in the office. Something as simple as having the fastest internet connection in the office allows higher productivity, employees can work without setbacks. This is especially important for a company with hundreds of employees and multiple departments.
A benefit of having access to high-end technology is that it can be very apparent through a business’ methods of marketing and engagement. There are usually budgets set for businesses’ marketing tools and resources and you can almost see how large a budget might be by how much you see the company advertised across different platforms, like social media ads or in related online blogs or articles. In addition to social media, the use of email marketing is a very important tool. It’s pertinent to have a list of contacts in real estate, including clients, business associates, colleagues and other real estate companies. The reason this is important is because another technological advancement that exists in today’s world of marketing and outreach for businesses involves email marketing. Of course, email has been around for quite some time now, but the way it has expanded really benefits businesses. Email marketing has specific online tools available for purchase (where price usually depends on number of contacts), where you can contact entire groups of contacts at once. This is important to keep up regular communications to consumers about advancements, updates and most importantly it’s a great way to advertise new properties available to a large group at once. This increases the potential for engagement and outreach when people are simply browsing the web for unrelated things.
Most of these marketing platforms include a central hub for different marketing tools that your business uses to promote themselves. It acts as the centre of your marketing platforms and as a tool for keeping all your contacts in one place. What’s great about the more advanced marketing platforms is that it also provides the company with reports in regards to engagement across different platforms, in terms of how many clicks and opens your emails have received. This is one of the new marketing tools that greatly benefits the whole company by showing you what your clients respond well to.
Communication with Clients
Through marketing strategies, companies are consistently communicating with potential clientele. There is an aspect of direct communication with people interested in the service. For example, visitors to your website or social media page may send you a direct message or send an email to your support team. It’s good to have an easy, quick and effective means of communication through any and all channels. The easier the user experience, the higher the chance of making connections and building a client base. Again, this will lead to more money and higher chances of success by landing more clients looking for commercial or investment properties. The chances of someone trying to reach out to a company after being unable to contact someone easily, is very low. The advantage of using good quality tools in an office can benefit this aspect of a business greatly.
You want the best kind of communication tools. This can involve a number of different technological advancements like rather than having one main landline, each employee in the office has their own lines. Having individual extensions to reach someone directly can greatly impact the efficiency of contacting the business. Nobody wants to reach a voicemail box that’s full, or listen to an endless list of employee names and their extensions trying to reach a particular agent. It seems like a small thing, but it can really affect the experience someone has trying to make contact. Especially if a potential buyer is serious about a property and is eager to make contact. It can even affect the experience of buying property and make it seem tough and negative overall.
To elaborate further on the additional ways you can increase ease of communication using high-end office technology, would be by increasing the available means of communication. When a business has a “dead” social media page, or a very low amount of traffic or engagement, it deters people from using them as a point of contact for purchases. People don’t generally trust a page where their last post was a couple years ago, or if someone tries to contact the business through the page and they don’t get a response. It’s important to keep redirected contact information on all pages, even if it’s been shut down. Think about an Instagram page that’s obviously been inactivated and they don’t include any redirections to their website or contact information, people will look elsewhere.
A good technological component of real estate web pages and online presence that puts a business ahead of its competitors, is incorporating the option to browse properties easily and quickly on the website itself. An example of this would be adding the option to tour commercial properties virtually. This provides a great user experience where potential clients can browse available properties and all associated property information even before having to contact an agent, or leaving their homes. Making virtual tours available online is largely dependent on having staff who can integrate this tool into a website, in addition to ensuring it works correctly without lagging or other technical complications. It is also a great addition to marketing notices, campaigns and ads to integrate video components.
It would also be an added benefit to think of adding buttons to directly link to the company’s website, or even better, a link to the property itself. You can include contact information for the agent representing the property and list some important and prominent information about the property. It’s important to include multiple methods of contact for both the agency representative and the company; like phone, email and chat (if available).
Throughout this article, there have been many benefits to using the better, high quality technical tools outlined. When you are in the office, you need a fast and easy means of communication with clients and coworkers. You need high-speed internet to allow for an efficient work environment, even in a large office. Other resources are required to assist with your website, online/email communications and using new marketing tools. Whether it’s by hiring staff who specialize in an area of tech-related software, or ensuring computer equipment is up-to-date, there are a number of ways to utilize new technology to increase business productivity. When employees have access to the latest technology, they end up working more efficiently and using their time to increase overall success of the business. It can be firmly said that having an office space with better technology not only makes the employee’s experience better, but also increases the quality of the clients.
The idea of building “green” has increased exponentially in popularity over the past several years. The concept may initially evoke visions of high up-front costs and following a set of complicated guidelines, but green building is actually well worth considering and is so much more than just a price tag. The U.S. EPA defines green building as, “The practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life-cycle from sitting to design, construction, operation, maintenance, renovation and deconstruction.” The key take-away from that statement is efficiency. Investing some time and energy into your building right now can have long-lasting benefits to both the sustainability of the structure, the environment and your wallet. Let’s look at nine key ways that green building can have a positive impact.
1. Lower Maintenance and Operational Costs
One of the biggest perks to green buildings is the drastic reduction in maintenance costs over the life of the structure. While building green might incur initial charges that are higher than traditional building, these costs are easily recovered over the years. These savings can be largely attributed to the various design elements that work to reduce water and energy use, thus lowering bills by up to a third. Maintenance and operational costs such as these traditionally account for up to 80% of expenses over the lifetime of the structure, showcasing the long-term benefits of this investment. Materials traditionally used in green building are also notably more durable than those that are not. Yes, it may be a bit more costly to build green or to convert your existing property, but the long-term financial benefits speak for themselves.
2. Vastly Improved Indoor Environment
Our surroundings have a huge impact on our overall experience of a space. Green building factors such as improved lighting sources, air quality, upgraded ergonomic features and thermal conditions have been proven to drastically reduce stress levels and increase the quality of life. Work environments that have embraced green technology have produced employees that are much more efficient and happier. According to a 2015 study done by SUNY Upstate Medical School, workers in these kinds of spaces recorded a 101% increase in their brain function and the American Academy of Sleep Medicine reported in 2013 that “employees in offices with windows slept an average of 46 minutes more per night”. This showcases how green building benefits go beyond just individual experience to have a more communal impact. Workers that are happier and more relaxed are proven to have a higher output and will stay at their jobs longer.
3. Saving Water
According to the World Green Building Council, green buildings that have received LEED certification are noted to consume up to 11% less water than those that are traditionally built. This is attributed to the installation of water-efficient plumbing. High-quality water purifiers can also allow green buildings to make use of natural resources, such as rainwater, and to recycle water, as well. This, again, has a significant impact, not only on the building but on the environment, overall.
4. Saving Energy
The World Green Building Council also reports that LEED certified buildings worldwide consume approximately 25% less energy than non-green buildings. Additionally, the Indian Green Building Council (IGBC) has shown that green structures in India can result in a 40-50% reduction in energy costs. Being that these structures are designed to draw energy from natural sources (such as sun, wind and water) over oil and coal, energy use is largely reduced. Just the introduction of solar paneling can save literally thousands over the lifetime of the structure.
5. Better Overall Health for Occupants
Whether living or working in a green building, occupants can experience a lot of incredible health benefits. With the absence of harmful organic materials and plastics that have been proven to release toxic carcinogens into the environment, those spending their time in green buildings are reducing their exposure to many items linked to allergies, respiratory issues and even certain types of cancers. Above and beyond just physical health, mental health is equally as impacted through the implementation of green building practices. In fact, a survey by Cundell determined that the natural elements within a green building created a 16% higher perception of well-being and a COGfx study showed that they performed 131% better when it came to crisis response and working under pressure. The inclusion of natural light in green spaces has also been proven to reduce the onset of seasonal affective disorder (also known as winter depression).
6. Lower Impact on Shared Resources
With the many energy and water-saving features applied to green buildings, builders are fighting back against a multitude of threats to our shared resources. This has global impacts, as well as local, and creates the possibility that we may preserve some of these resources for future generations.
7. Environmental Benefits
The use of sustainable materials and energy sources allows green buildings to reduce their carbon footprint exponentially. UNEP reported in 2009 that this “building sector has the largest potential for significantly reducing greenhouse gas emissions compared to other major emitting sectors”. In 2016, UNEP also relayed that it “has the potential to make energy savings of 50% or more in 2050, in support of limiting global temperature rise to 2 degrees Celsius (above pre-industrial levels)”.
8. Material Efficiency
Green buildings also commit to using as few materials as possible, while still maintaining the quality and integrity of the final outcome. They rely on many recycled and repurposed materials to reduce waste and preserve many natural resources. This also contributes to a reduced carbon footprint and helps to improve the outlook for our environmental future.
9. Long-Term Durability
Lastly, you can’t underestimate the durability of green structures. The sustainable materials that are used to create such buildings have been proven to last longer, on top of all of the other benefits they create. Recycled roofing and decking, for example, can be exposed to the elements for years without needing replacement and with minimal upkeep. Additionally, seeing as they are often not treated with chemicals, they further contribute to a healthy environment, both on the micro and the macro level.
It is quite obvious to see that the benefits of green building far outweigh any perceived detriments. Embracing the idea of building green has impacts that extend beyond just the structure itself, all the way out into your local community and even on a global scale. As more and more builders around the world begin to adopt green technology into their designs, we can expect that these benefits will only continue to grow. It may well be worth considering, even if the upfront costs may be a bit higher.
Many are aware of the benefits of investing in real estate properties. From gaining financial freedom by having a high-income source and being able to expand your assets, investing in commercial real estate is almost always a great idea.
Finding the right property is never an easy task, though. Common variables to consider include the location of the property, the price based on the market and location, as well as the business opportunities that could potentially come about from this new investment.
When looking for a commercial real estate property, it can be a great idea to purchase one in a populous city. With the influx of people, there is a better chance of success, and the return on investment can often be higher. With the increase of activity in the US market post-pandemic, be sure to consider the exciting cities the market has to offer This business venture could be the start of something exciting and highly profitable!
Salt Lake City, Utah
Utah is a unique place to visit, with its mountainous scenery and multiple national parks that are bucket listers dream come true. Salt Lake City, Utah is home to a booming downtown. It’s crowded with both people and businesses of all types and can be a great city to consider when looking for the perfect investment property for your needs. Recognizing the value of collaboration in investment sales is an important aspect for the brokers at SVN ALTA. Based in downtown Salt Lake City, SVN ALTA brokers are experts in the market for commercial real estate investments.
Why Salt Lake City?
As the capital and most populated county in Utah, Salt Lake City has a diverse population. From its rich culture, a popular ski destination, and varying shops and Irish pubs and wine bars, it is easy to see why Salt Lake City is a common destination for weekend trips or for long term living. The opportunities that this city in the Beehive state has to offer are nearly limitless.
In terms of commercial real estate in the exciting city, it has great rates and a high success rate for investors.
What industries are popular in Salt Lake City?
Salt Lake City notably has a lot to offer, but Utah’s diverse economy can be narrowed down to more specific industries. When considering an investment property, popular industries include tourism, mining, agriculture, manufacturing, information technology, finance, and petroleum production. Having these options when looking for a commercial real estate property creates the opportunity for a successful investment.
The uniqueness of Utah can often relate back to its diverse culture and varying population in relation to other large and populous US cities. Salt Lake City is known for a high population of Mormons, which help to contribute to the rich culture of the city, as well as the economic success. The predominant Mormon culture often focuses on delayed gratification and stable families. This helps to contribute to the economic success of the city as a whole.
The people of SLC generally take education very seriously and have a high percentage of college graduates. This can be another contributing factor to the success of the city’s wealthy economic state that has been withheld over the years. Investing in an area of a wealthy population is definitely something to highly consider when looking for a location for a business venture. In comparison to smaller cities, commercial real estate investment properties would typically do better in a larger city.
Post-Pandemic Commercial Real Estate
As the pandemic nears an end or society’s return to the “new normal” some things have changed in the commercial real estate world. While location is still one of the number one factors to consider when closing the deal on a new property, the prices in the market have definitely shifted. As the pandemic led to people fleeing populated cities, the prices have decreased. Now can be a great time to buy because as vaccinations have increased and the Covid-19 crisis has declined, people are likely to return to the cities. Salt Lake City and its location and price positioning makes it an incredible place to buy in the current market. This price decrease makes it the perfect time to buy, and will increase as time passes, so getting in while they are low is important for the biggest return on your investment. With the increase of work from home for businesses, larger buildings are currently being used less. With the eventual shift back to the office, new commercial real estate will be needed.
A common question people ask in the commercial real estate industry is “How do brokers get paid?” Although the payment to a broker is involved with every commercial real estate transaction, it seems many people lack clarity on the subject. Truth be told, the process of getting paid as a broker can get a bit complicated. The fact that commission rates can vary also contributes to the confusion around how brokers get paid. Whether you’re interested in becoming a broker one day or you’re thinking you might want to work with one, this blog post will explain how brokers get paid for their work.
How do CRE Brokers Get Paid?
What many people do understand is that commercial real estate brokers get paid based off commission. The commission is typically paid by the seller of the property, but the buyers of the property may also owe the broker a payment as well. Who pays the commission depends on who the broker is representing in the transaction. When representing both parties, both the seller and buyer will pay the broker a commission fee. If there are two brokers involved with the deal, they will split the commission between each other. However, the amount in which the broker is paid varies due to anti-trust laws.
Due to anti-trust laws, it is illegal to set a commission rate across a market or industry. This means the commercial broker and their client need to negotiate a commission rate before agreeing to work together. Negotiating a price for a commission can be great for both the client and the broker, as the costs of different properties vary greatly. Additionally, some properties are easier to find than others, which changes how difficult the broker’s job is. According to our partners at SVN | Southgate Realty, most commercial brokers get paid between four percent and eight percent of the sale price from the property. However, this may increase or decrease based on the complexity of the deal. So, be sure to consider how hard the broker will need to work when negotiating their commission rate.
How Does Commission Work?
In commercial real estate, a property can be sold or leased. The amount a commercial real estate broker earns is based on the price of the property. So, if the broker and the seller agree on a seven percent commission rate and the property purchased was $1,000,000, the broker would earn $70,000. However, if another broker was involved to represent the buyer of the property, the $70,000 would be split between the two.
For commercial real estate, because leases are typically paid on a monthly basis, there is a different way to calculate the commission of a broker. With leases, the broker is paid based on the length of the lease agreement and the monthly rate. For example, if a property is leased for three years at $15 per square foot, and it is 2,000 square feet, the lease value would be $90,000. We find this from 3 years x ($15 x 2,000 SF). If the seller and broker agreed on a seven percent commission rate, the broker would make $6,300.
How Do Brokers Get Paid on a Lease?
Assume that Corporation X just leased 3,000 square feet to Landlord Y’s Shopping Center. The lease is for 4 years, starting at $15 per square foot with $0.40 annual rent escalations. Here is how you break this deal down.
Year One: $15 PSF x 3,000 SF = $45,000
Year Two: $15.40 PSF x 3,000 SF = $46,200
Year Three: $15.80 PSF x 3,000 SF = $47,400
Year Four: $16.20 PSF x 3,000 SF = $48,600
The total lease consideration from all four years amounts to $187,200. If a broker gets a 6% lease commission for this deal, this percentage is multiplied by the total lease consideration amount. The total commission is $11,232. The landlord and tenant representative brokers split the commission 50/50, receiving $5,616 each. Also assume that the broker gets a 60/40 split with the brokerage firm. The broker then walks away with $3,369.60, or 60%, from this deal.
What Goes Into Sales Transactions?
In most cases there are usually two kinds of brokers involves in a sales transaction. You have the seller’s agent and the buyer’s agent. Commercial real estate sales usually have a longer timeline than what you would expect, so expertise on the property and area should be extensive. There are differences between investment sales and owner occupied deals. Sale transactions involve the title, inspections, environmental conditions and entitlements. It is important to note that closing on a commercial real estate sale cannot occur under 60 days. It will often take 3 to 6 months until all parties reach an agreement.
Brokers that represent sellers will have a pre-negotiated listing agreement in place with commissions already revealed. Commissions from a sales transaction will range from three to six percent, but it isn’t uncommon for sellers to only pay their own brokers, and not the buyer’s broker, on larger investment sales. In this scenario, commissions may be lower, such as 2%.
Do Independent Contractors Have Advantages?
It must be understood that most commercial real estate brokers will work as independent contractors. This means that they are contracted employees. They have a written contract in place with a brokerage company and will be paid accordingly as a W-9 employee. However, the brokerage firm will not withhold taxes, holding independent contractors responsible for addressing matters related to the IRS. These matters include taxes, social security, medicare, and health insurance. Independent contractors are self-employed, though the brokerage firm will still have significant input.
The relationship between brokers and independent contractors must remain steady. If both sides correctly follow the terms of the Independent Contractor Agreement for Sales Associate (TAR 2301) and the Statement of Understanding (TAR 2302) they can reduce their risk of facing penalties from the IRS. The rights and obligations of a broker and an agent will be defined by the Independent Contractor Agreement. Provisions that clarify the agent is not an employee will be outlined in this document. The agent must agree to terms provided in the Statement of Understanding, which will help legally confirm the independent contractor relationship. It is recommended to annually complete this document to reaffirm between brokers and independent contractors.
Should You Have a Tenant Representative Broker?
If you are looking to save money by acting as your own representative in a real estate deal, then you will be disappointed. If you do not have a tenant representative broker before going directly to the landlord, you can expect the end result to be the landlord saving money and you losing money. Without expert knowledge of the market or the many traps that are part of commercial leasing, the landlord can manipulate negotiations and take advantage of you. Tenant representative brokers guide you through the process of finding property space and will negotiate with the landlord for the best deal that works for you.
What Is the Broker Opinion of Value?
If you know how appraisals work, then you will discover that a Broker Opinion of Value (BOV) is very similar to an appraisal. An assessment of a property’s value is known as an appraisal, which analyzes the condition of the property as well as its amenities, location and comparable sales in the area. A Broker Opinion of Value is a general estimate of value for a single commercial property. Investors, property owners, lenders, accountants and real estate attorneys are just some of the real estate professionals that will use a BOV. The level of a BOV ranges from a simple document of two to three pages to a more complex book of 40 to 50 pages. Brokers can get paid by banks anywhere from $250 to over $1,000 to publish an opinion of value on a property.
Who Pays the Broker?
The person who usually pays the broker(s) involved with commercial real estate transactions is the property owner or landlord. Almost always, the seller or landlord will pay both brokers who are representing clients in the commercial real estate transaction. This is because the landlord wants to get the property off their hands and needs the help of the broker to do so. If you are looking to purchase a property, do not skip out on using a broker because you think you will get a better deal. Brokers are very resourceful, and you typically won’t spend any money on their services when you are buying the property.
Looking for a Commercial Real Estate Broker in Salt Lake City?
We hope this blog post cleared up any confusion you had about how brokers get paid. If you are looking to buy or sell a commercial property in Salt Lake City and need assistance from a broker, please feel free to contact us. Our highly skilled and experienced advisors will help you get an excellent deal and can answer any questions you may have. We always strive to make the transaction process as easy as possible for our clients. So, please feel free to reach out so you can work with one of our advisors today!
Thinking of investing beyond residential and retail real estate? Try industrial property investing! Industrial properties are large allotments of real estate and infrastructure that are used for a variety of warehousing, manufacturing, and commercial purposes.
And they make excellent investments for a multitude of reasons. Almost everything we use on a daily basis—food, shampoo, clothes, laptops, showers, ovens, toys, bikes, cars, and so much more—come from industrial properties!
Industrial properties are stable investments for two reasons. The first reason industrial properties make sound investments is because they cater to a variety of applications. Some popular uses for these spaces include manufacturing and production, distribution, retail, and office space. Whatever your industrial investment goals or needs, there is definitely an existing space to help you get started.
The second reason that makes industrial properties excellent investments comes from the perpetually high supply and demand for industrial processes and employment. With food, sanitation, and infrastructure at the heart of every city and suburbs, there will always be a huge workforce ready to rent and run industrial projects on your site.
If you’re thinking of purchasing an industrial property, this article is for you. We’ve compiled a no-nonsense guide to industrial properties to help you exactly what you need! Read on to learn about 10 critical factors to consider with industrial properties.
1. The Industrial Property Class
Knowing the class of an industrial property will give you surface-level insights to the value of the investment at hand. Industrial real estate is graded with an A, B, or C classes according to their age, condition, and location. Classes are also graded according to the social and economic factors and predictions of the property’s location. Property classes can help you manage your expectations when it comes to planning for future renovations, tenants, and business traffic. Take a look at each class and how its grade pertains to the property quality.
Class A Industrial Property
Class A Industrial Property is the highest grade of industrial property. In this class, you will find the most expensive, pristine, and desirable properties. Class A real estate is new or recently renovated, is in excellent physical condition despite its age, is situated in a great location, and is bustling with economic activity. These types of properties generally rent to high-earning tenants in locations that experience very low vacancies. It is common for these types of properties to be professionally managed.
Class B Industrial Property
Class B Industrial Properties are secondary to Class A when it comes to age and/or quality of the property. Class B properties may be older, may contain less desirable amenities, and may be situated in less economically active locations. The tenants in this property grade generally earn less than Class A property tenants. Although it’s more common for these properties to managed by retail investors, professional management is not unheard of.
It is important to note that Class B properties can be re-graded to Class A properties after renovations. Some investors apply to rezone these properties during the renovation process as mixed-use real estate to hedge their risk and expand their application. The practice of rezoning industrial properties is common in emerging cities experiencing booming population and economic growth.
Class C Industrial Property
Class C Industrial Property score lower in all possible grading factors compared to Class A and B properties. Class C properties are almost always old—at least 20 years or older—and are inferior in physical condition and amentitiy availability. Class C real estate is located in rundown or undesirable areas. These types of properties need a lot of maintenance, renovation, or in some cases, complete remodels. These types of properties have high vacancy rates and low-income tenants.
If at first you are dissuaded by this property gradeI, we urge you not to overlook Class C properties. These types of properties may be promising investments for seasoned real estate investors looking to cataylze growth in a particular area. Just like Class B properties, Class C real estate can be re-graded, although they will require larger time and financial investments.
Lastly, this type of property may prove advantageous for a real estate investor who owns and operates their own business. If you intend to conduct your own business on the property, you don’t have to worry about renovations, resale value, or rental value right away. You can forego a lot of renovations and run your business as you please.
2. The Industrial Property Type
Just like how there is a class associated with each industrial property, there is also a type associated with each property. Industrial properties are classified into 8 types according to their physical condition, layout, and amenities. The type of industrial property will dictate the types of tenants you will rent to, as well as the businesses they own. Here is a quick overview of the different types of industrial properties.
Bulk Warehouse Properties
Bulk Warehouse Properties are massive plots of land with lots of building square footage. Bulk warehouses are used for storing for inventory. They have high ceilings for installation or movement of large equipment. They can also have many delivery ports for trucks, trains, trailers, or planes.
Flex Warehouse Properties
Flex Warehouse Properties are a lot like bulk warehouses, except they are generally smaller in overall square footage and ceiling height. The main difference with flex warehouses is they can serve several applications in addition to storage, such as manufacturing, office space, and more. These types of properties are great for start up companies, small companies, etc.
Heavy Manufacturing Properties
Heavy Manufacturing Properties are intended for ongoing, high-capacity productions. Heavy manufacturing real estate often has heavy-duty manufacturing infrastructure built into the building. Such infrastructure includes electric power sources, water lines and filtration, ducting and ventilation, storage tanks, and exhaust. These facilities may or may not come with built-in production equipment like cranes, production lines, lifts, compressors, and more.
Light Assembly Properties
Light Assembly Properties are used for assembling products made on heavy manufacturing sites. Light assembly properties are a less intense version of heavy manufacturing properties. They may have comparable infrastructure and tools, but these properties focus more on assembling ready-made components instead of processing raw materials. This type of property tends to have less production machinery and instead more quality-checking, packaging, and distribution equipment.
Cold Storage Properties
Cold Storage Properties refer to large facilities with freezer and refrigeration spaces. This type of real estate is mostly used for food storage and distribution, but can also be used to store other perishable goods. Like warehouses, these types of properties tend to have many ports for various types of delivery vehicles.
Telecom and Data Centers
Thanks to cloud computing, e-commerce, and data security, Telecom and Data Center Properties are a booming type of industrial real estate. Telecom and data centers are enormous properties equipped with large-scale electrical, power, and ventilation systems to maintain an optimal environment for computers, servers, and electrical equipment.
Industrial Showroom Properties buildings are a unique amalygmation of retail inventory and display. These spaces are commonly rented to tenants that sell and store large retail equipment like gun cases, refrigerators, furniture, and more.
Research and Development Space
Another great type of industrial investment property are Research and Development Properties. Research and Development properties are expected to remain in high-demand as software, computing, and electronic technology continues to be popular. This real estate appeasr similar to flex warehouses, except they usually are situated in large campuses or parks with landscaping and huge parking lots. Research and Development may have specialized equipment built-in or incorporated onto the property, such as computers, servers, or laboratory equipment.
3. The Industrial Property Location
This aspect is an extension of the class and type of property that really needs a lot of consideration. Location plays a huge role in the current and future value of your property, as well as the future success of the business that will take place in your industrial property.
It is important to the logistical factors of location, like nearby employers, workforce, industry supply and demand, and projected economic growth.
It is essential to research the economic activity and expectations of the area by which your property resides. Understanding the growth and activity of the local economy will give you an idea of how future construction and infrastructure projects will affect prospective tenants, customers, and employees who need to travel to your property. Informing yourself of the infrastructure and nearby construction will also give you realistic insights regarding how your suppliers, customers, tenants, or employees will reach your facility.
To contrast considering how the local economy will affect the value of your property, we urge you to think also about your residential neighbors. Consider how your industrial business may affect nearby residences, if any, as well as natural habitats.
4. The Condition and Maintenance of the Industrial Property
These components are also extensions of the class and type of industrial property that need in-depth consideration. You will need to assess the class and type of your industrial property to ensure your property will be a responsible, safe, and productive place to conduct business. In addition to knowing the amounts you’ll have to pay for routine care, you’ll also have to have an idea for how often you’ll need to maintenance, inspect, lease, and renovate your property. Just remember—keep a detailed log of all the work done to your property. Having thorough records will help you through future instance claims and appraisals.
5. The Legal Implications of the Industrial Property
There is an endless number of legal issues to consider before purchasing an industrial property. Identifying the class and type of the property will help you out a lot when it’s time to legally safeguard yourself with code renovations and industry-specific insurance.
To eliminate the chance of future lawsuits, set yourself up for success by assessing the safety conditions of your workplace. Some common legal issues associated with industrial properties include ADA compliance, as well as noise, light, or environmental pollution.
Before renting out your industrial site, ensure your property is up to date with American Disabilities Act codes and regulations. This is a simple, but huge way to avoid the headaches of a discrimination lawsuit.
And when it comes to pollution of any kind, you need to perform your due diligence by inspecting the machinery, refuse, and sanitation processes of your facility. Performing noise and light pollution due diligence means considering the type of tenant you expect to lease to and how their productions will affect the surrounding residential quality of life. Note there may be noise and light ordinances in place where your property may be located. Performing environmental due diligence means informing yourself of the property’s past usages and any possible environmental accidents such as chemical spils. Your job afterward would be to complete any cleanup or renovations that would prevent further environmental harm.
6. Industrial Property Taxes
Property taxes are pretty straightforward and easy to calculate for a given area, but it does require some initiative on your part. You can investigate the property taxes of your city by exploring the local government’s website.
In short, the local government will assess the value of your industrial property and tax it accordingly. This brings us back to how crucial it is to understand how the class and type of an industrial property affects its value. A property that is overvalued with accrue high property taxes, and inversely, an undervalued property will have lower property taxes.
An interesting and sometimes overlooked aspect of this is tax breaks for your industrial property. There are several cases in which your property could benefit from a tax break, including depreciation deductions, non-mortage deductions, and more.
7. Industrial Property Insurance
Considering the many use cases for industrial property, there is no doubt you will need at least one type of insurance for your property. Whether it be manufacturing, storage, or research and development, there is always the chance for something catastrophic to happen. Survey the types of insurances you are required to have as well as the types of insurance available to you. You’ll need to carefully determin the amount of coverage you need for the land, building, and machinery located on your property.
Some common industrial insurance packages include fire, flood and water damage, electrical outage, machinery accident, lessor’s risk, commercial property, and commercial general liability insurance.
And just like with condition and maintenance tasks, don’t forget to keep a record of any renovations and maintenances to fulfill insurance qualifications.
8. Industrial Property Loans and Financing
A loan for an industrial property has specific processes and requirements that differ from other real estate loans. For example, an industrial property loans are typically given to business entities with a loan-to-value ratio between 65% – 80%. Industrial property loans also have widely-varied repayment lengths with long-term amoritization schedules. Of course, there are other aspects particular to industrial property loans that will require further investigation.
9. The CAP Rate of the Industrial Property
Taking all of the above factors into account will give you a very realistic insight into the CAP rate of your industrial investment property. The Capitalization Rate (CAP rate) of a property refers to the financial returns you expect to receive from your real estate investment. If you plan on investing seriously in industrial real estate, you’ll want to consider properties that have promising returns given the value, location, and market demand for the property. You can calculate this rate using a CAP rate calculator. This calculation will take into account the revenue, expenses, vacancies, and value of the property.
10. Your Risk Tolerance
Now that you’ve assessed all the possible factors concerning industrial property investments, it’s time to take a realistic look at your own risk tolerance. Industrial properties are large capital investments that can easily be destroyed by in-house accidents, natural disasters, lawsuits, or financial mismanagement.
For every dollar you decide to put into an industrial property, ask yourself if you are willing to lose it. If the answer is yes, proceed with caution. If the answer is no, consider investing in another, perhaps less risky type of real estate, like duplexes, AirBnBs, or real estate investment trusts (REITs).
Industrial properties are an exciting venture, but require lots of planning and a thorough understanding of the local economy, industrial use, and financial responsibility. We hope this article has helped you cover your bases when it comes time to consider a future investment in industrial real estate.