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April 08, 2019

Industrial Investment: Things to consider

In Brisbane’s current market, there is no doubt that industrial property has a lot of potential to reach substantial yields.  Compared to retail or commercial investments, industrial property also has the capacity for capital growth. Average income for industrial investment properties comes in at least 2% higher than the average retail or office space, making it a much better investment. Capital growth can be as high as 2.5% on top of that, which is undoubtedly a better option for anyone in the position for this type of investment.

Of course, like anything in real estate, with higher returns there are always higher risks. So, what should you know before investing in industrial space? Here are some tips.

Investment Return Drivers

You need to understand what the drivers are for things like retail spending, and as an example we use online selling. Although a successful online retailer might not have the need for a physical retail space, their need for industrial space for distribution and warehousing of the products they sell online is something that can drive the industrial property market well.

Because ten-year leases are not uncommon for industrial space, it can be a very good incentive for investors to buy up industrial space for stability purposes.

Benefits Of Industrial Investments

As well as long more stable leases and higher yields other benefits include annual rent increases in line with CPI, lower building maintenance costs (depending on industry), and the likelihood of tenants covering most of the outgoings.  Good management of industrial properties is essential to ensure you investment is being taken care of properly.

Risks Of Industrial Investments

As with all real estate investment, there are risks associated. In industrial property, vacancy rates can often be higher especially purpose-built properties. Finance for industrial properties can often come with higher interest rates and a much bigger demand for equity or capital outlay upon purchase.

What To Consider When Investing in Industrial Property

Look for a property with longevity that will draw good tenants. Look for newer, more modern facilities. Industrial property can become outdated and obsolete very quickly.

Your property should also have lots of space, especially in height. This will help machinery to be used and storage to be forklift ready. It should be in a good location with modern well-designed offices. Your property should also have enough parking for employees, visitors, customers etc, and easy access for deliveries or distribution and transport.

Investing wisely allows you to build your portfolio and make profit on every investment. Returns are what you buy investment properties for, so make sure you can get the returns you need to grow.