What is Industrial Real Estate? Explained

In Real Estate, there's a special kind of property that doesn't always get the spotlight it deserves. It's called Industrial Real Estate. But do you know What is Industrial Real Estate? Imagine all the everyday items we rely on – like cars and gadgets, before they end up in stores, they have to be made and stored somewhere. And that's exactly where this type of Real Estate plays a crucial role. 

It can be defined as a business which provides properties for commercial use. This is just a basic definition of what is called Industrial Real EstateExplore the blog and learn more about What is Industrial Real Estate and discover its vital role from production to storage, and how it drives economies.

Table of Contents 

1) Understanding What is Industrial Real Estate 

2) Importance of Industrial Real Estate 

3) Types of Industrial Real Estate 

4) Factors driving the demand for Industrial Real Estate

5) Market trends in Industrial Real Estate 

6) Investment opportunities in Industrial Real Estate

7) Advantages and disadvantages of investing in Industrial buildings

8) Conclusion 

Understanding What is Industrial Real Estate 

Industrial Real Estate refers to buildings and properties used for businesses to make and store products. These places can include big warehouses, places where things are built, and places where products are prepared to be sent to stores. Unlike houses or shops, industrial spaces are focused on helping businesses work better, not on where people live or shop. 

However, you should also remember that Industrial Real Estate does not necessarily involve investing in and utilising big warehouses; it has a significant contribution to the daily lives of people. For example, daily use of toiletries, food, clothing, and other objects which are used either in offices or in our homes are made and stored inside industrial buildings. So, any building utilised for commercial purposes, i.e., from manufacturing to storing goods, can be categorised as a part of Industrial Real Estate.

Importance of Industrial Real Estate 

Now that you know What is Industrial Real Estate, let’s understand its importance in the world of Real Estate. This type of Real Estate might not always be the most glamorous part of the property world, but its importance cannot be understated. Let's take a closer look at why Industrial Real Estate holds such significance:

Backbone of economies 

Industrial Real Estate forms the backbone of economies worldwide. Without these spaces, companies would struggle to manufacture goods efficiently, impacting the availability and affordability of products we rely on daily, from clothing to electronics. 

Job creation 

These industrial properties are not just bricks and mortar; they're job creators. From assembly line workers to managers, security personnel, and technicians, industrial spaces provide employment opportunities across various skill levels.  

Enabling innovation 

Industrial spaces offer housing and development facilities, promoting innovation in various industries. These spaces are where new products are conceptualised, tested, and brought to life before they reach the market. 

Trade and export 

Industrial Real Estate plays an important role in international trade. These spaces facilitate the movement of goods across borders, contributing to a country's trade balance and economic growth.  

Stability in investment 

Investing in Industrial Real Estate can earn you a stable income stream. Leasing properties to businesses provides landlords with regular rental income, making it a reliable option for long-term investors. 

Types of Industrial Real Estate 

Each type of Industrial Real Estate serves a specific purpose within the broader industrial dynamics. Their design, layout, and features are tailored to the unique needs of the industries they support. Here are some of its key types:

Industrial land

As the name suggests, it is a land zoned industrially. It doesn’t have any specific premises or boundaries. Therefore, this l can be used however the client sees fit. It can be used for any surface operation.

Industrial land in your portfolio allows you to build any building on that land from scratch. It gives you the creativity and the freedom to create any structure fitting according to your client's needs, which they can again lease to the client upon completion. They only have to have to pay upfront for the construction costs, which is an excellent way to make a good revenue.

Warehouse and distribution centers 

Warehouses are integral to the supply chain, providing storage space for goods awaiting distribution. On the other hand, distribution centres are strategically located hubs designed for efficient movement and distribution of products. These facilities often incorporate advanced technology, automation, and optimised layouts to streamline operations. 

Manufacturing facilities 

Manufacturing facilities house the production processes of various industries. These spaces are designed to accommodate specialised equipment, assembly lines, and workflow arrangements that cater to specific manufacturing needs. Location is crucial for offering proper manufacturing facilities, as they need access to transportation networks and raw materials. 

Flex spaces 

Flex spaces are versatile properties that can be adapted for various uses, including light manufacturing, research and development, and even office spaces. These properties offer flexibility for businesses that require spaces with customisable layouts to meet evolving operational requirements. 

Research and Development (R&D) parks 

Research and Development (R&D) parks provide space for innovation, experimentation, and technological advancements. These parks often house tech companies, pharmaceutical research, and other industries that require specialised labs, testing facilities, and collaborative workspaces.  

Industrial parks 

Industrial parks are planned developments that encompass a mix of industrial property types within a single area. They provide a range of services and amenities, from basic utilities to shared infrastructure, making them attractive to a variety of industrial tenants. 

Cold storage facilities 

Cold storage facilities play a vital role in preserving perishable goods, including food and pharmaceuticals. These properties are equipped with temperature-controlled environments and specialised equipment to maintain the quality and safety of products. 

Data centres 

With the digital transformation, data centres have become important for storing and processing vast amounts of digital information. These properties require advanced cooling systems, security measures, and robust technological infrastructure to ensure uninterrupted operations. 

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Factors driving the demand for Industrial Real Estate

The following are some factors that are driving demand for Industrial Real Estate in the moder trading environment: 

a) The e-commerce business is exponentially growing. It is one of the most critical factors that is driving the demand for Industrial Real Estate. Online retailers and manufacturers require their goods or materials to be stored in large warehouses that protect their products from natural calamities. Thus, the necessity to take buildings on lease for large-scale distribution has increased. 

b) Online retailers and manufacturers are looking for industrial properties closer to the major population areas to keep up with the rise in demand for one-day or next-day delivery. 

c) By diversifying the supply chain, manufacturers and retailers are protecting themselves from the vulnerability they faced during the pandemic. They are acquiring industrial spaces that will help them both in storing and distributing. 

d) Online grocery shopping has also increased the need for Industrial Real Estate to provide these retailers with the best cold storage facilities. Huge bulk orders are still pouring in, even after the pandemic. Therefore, a niche market has developed within the Industrial Real Estate market, which has seen considerable growth. 

e) With the increase in population worldwide, the demand for products is also increasing. Moreover, thanks to digitalisation, customers are now expecting one-day or same-day delivery for their products. This has made manufacturers and retailers acquire warehouses in suburban and urban locations. 

f) People are now very much aware of sustainability. The need for sustainable lighting, such as solar panels and eco-friendly building materials, is rising. This attracts more environmentally conscious tenants and investors to this Industrial Real Estate market.

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Market trends in Industrial Real Estate 

The world of Industrial Real Estate is always changing, and it's important to know what's happening currently. Here are some current trends in the Industrial Real Estate market that you can follow to stay updated:

Quick deliveries matter 

People like getting their orders fast, so smaller warehouses are popping up closer to where people live. This makes it easier to deliver things to customers quickly, especially in busy cities.  

Global connections 

As international trade continues to grow, warehouses are strategically positioned near transportation hubs and ports to provide the smooth movement of goods across borders. These locations minimise transportation costs and ensure global supply chain efficiency. 

Flexible spaces 

Some companies don't want to commit to big spaces for a long time. They need flexibility. Industrial Real Estate is adapting by offering spaces that can change to fit different needs. 

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Investment opportunities in Industrial Real Estate 

Whether you're an individual investor or an institutional player, understanding the investment opportunities within Industrial Real Estate can be a strategic move towards building a well-rounded and prosperous portfolio. Consider the following to find opportunities in this type of Real Estate market:

Adaptive reuse opportunities 

Adaptive reuse is not only a trend but also an investment opportunity. Investors can identify old, underutilised industrial properties and convert them into innovative spaces that meet the demands of modern businesses. This way, they can benefit from both rental income and potential appreciation. 

E-commerce growth 

The booming e-commerce sector has driven the demand for large-scale distribution centres and fulfilment warehouses. Investing in properties that meet the needs of e-commerce businesses positions investors at the forefront of this evolving market. 

Sustainable investment approach 

Many investors are prioritising sustainability and green initiatives. Investing in environmentally friendly industrial properties equipped with energy-efficient systems and sustainable features not only aligns with responsible investing but also attracts environmentally conscious tenants. 

Technology integration

With the help of technological integration, it becomes easy to operate industrial properties. The integration of automation, artificial intelligence (AI), and robotics helps increase efficiency, reduce labour costs, and save time. Nowadays, buildings are also equipped with Internet of Things (IoT) sensors, which reduce maintenance costs and help in efficient energy management.

Advantages and disadvantages of investing in Industrial buildings 

To know entirely about this industry, you must know both the advantages and disadvantages of investing in Industrial buildings. So, consider the following before investing:
 

Conclusion 

We hope you understood What is Industrial Real Estate from this blog. In this blog, we discussed that Industrial Real Estate can be a smart choice if you're considering investing. You can earn regular money by renting these spaces to businesses.  Moreover, if the place is in a good spot, its value will increase over time.

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