What To Look For When Investing In An Industrial Property

Investing in industrial properties is one of the best ways to make your money work for you. With longer lease terms and higher rental income potential, buying and renting industrial properties can be a more attractive investment than residential properties.

"The advantage of commercial property is that the rents tend to be steadier and lease terms are typically more concrete and long-standing, which means tenants are almost always available. Commercial properties tend to return more gross revenue with less work," tells Forbes Advisor.  

The boom in online shopping has pushed the demand for warehouse spaces, further making industrial property a great step for those looking to diversify. 

Here are six things to look out for when shopping arou nd for industrial property investments:

1. Location, Location, Location

Location is one of the most important features of a property, and sometimes it can make or break an investment. This is because where the property is affects the demand for the space and the rental income that's possible. Location factors that work in an investor's favour include: Being in close proximity to public transport routes and highways, availability of workers in the area, and access to key markets. Being in a location with other warehouses and businesses can be a big plus, too, as it gives tenants the chance to network and collaborate. 

2. The Property's Condition

It's essential to go through an industrial property with a fine-tooth comb to assess its physical condition. Any repairs or renovations will affect the value of the property and your potential return on investment. Even if something isn't broken, it doesn't mean it shouldn't be upgraded. Bringing a property into the future by improving lighting, HVAC systems, and security; installing solar panels and high-speed WiFi; and incorporating smart technologies can all help make an industrial property way more attractive to businesses. 
 

So, keep repairs and upgrades in mind when considering the price of properties. 

3. Is The Zoning Right? 

Zoning can be an impediment to your plans. If you're considering investing in an industrial property, check the zoning regulations and permitted uses for the site. It's important to be aware of any restrictions or limitations that could affect your plans or the businesses you could attract. If you do want to rezone, be prepared to wait, "A rezoning application can be lodged to the Municipality if a property owner wants to change the zoning class of a property from one type of zoning to another, or to operate a business on his/her property which is zoned for residential use. A rezoning application needs to be lodged to the relevant Municipality and can take up to a year to be approved. The Municipality requires certain complex documentation with a rezoning application, and the application fees can be really costly," explains Town Planner. 

4. Are There Already Tenant Agreements In Place?

A lease agreement will remain valid and in full force until its expiry date, even if a property is bought and has a new owner. Therefore it's essential, if the property you're interested in is already leased, to review the tenant and lease agreements to understand the terms and conditions. Consider the length of the lease, the rent amount, and any provisions for rent increases or renewal - this will all greatly impact your return on investment. 

5. What's The Demand, And Will It Increase? 

It's important to do your due diligence by researching the local market to understand the demand for industrial properties and the common rental rates. When you have this information, you're able to estimate the potential income you could make with the property and make informed decisions about pricing and marketing. Also, are you choosing an area that could offer a higher ROI in a few years because of development? Buying early in an up-and-coming development can be extremely lucrative. This is where choosing the right industrial and commercial property specialists come in. API Property Group specialises in industrial and commercial property throughout South Africa's major hubs, and can direct you to the best investment possible and will guide you throughout the purchasing process. 

6. What's The Demand, And Will It Increase?

Securing financing for this big of an investment can be a challenge. It's important to have a clear understanding of the financial implications before you take a leap. Costs to keep in mind include interest rates, fees, and down payment requirements. You've also got to consider your current financial status and credit score to see what kind of loans are available to you. 

When it comes to property investment, going industrial has so many pros from increased rental rates and longer leases to the potential for a higher return on investment. But, there is a lot to consider before taking the leap. By carefully considering the above factors and taking proactive steps to improve the property, investors can enjoy long-term success in the property game.