Definition
Industrial is a commercial real estate property type used for manufacturing, warehousing, storage, logistics, distribution, and light industrial operations. Industrial properties are typically leased to businesses rather than individual consumers.
Common Industrial Subtypes
- Warehouse / Distribution: Large buildings used for storage and shipping.
- Bulk Distribution: High-clear height facilities near major transportation hubs.
- Light Industrial: Smaller facilities for assembly or limited manufacturing.
- Flex Industrial: Combination of warehouse and office space.
- Cold Storage: Temperature-controlled facilities for food or pharmaceuticals.
Key Physical Features
- Clear height (e.g., 24–40+ feet)
- Dock-high and grade-level loading doors
- Truck court depth and circulation
- Proximity to highways, ports, rail, or airports
- Power capacity and floor load strength
Lease Structures
- Triple Net (NNN): Common in industrial; tenants pay most operating costs.
- Long-term leases: Often 5–10+ years.
- Built-to-Suit: Designed specifically for a tenant’s operational needs.
Performance Drivers
- E-commerce growth
- Supply chain reconfiguration
- Population growth and consumption patterns
- Transportation infrastructure access
- Land availability constraints
Risks
- Tenant concentration: Single-tenant exposure in large facilities.
- Functional obsolescence: Low clear height or poor logistics layout.
- Economic sensitivity: Manufacturing and trade cycles.
- Zoning and environmental issues: Industrial use restrictions.
Example
A 500,000-square-foot bulk distribution center near a major port leased to a national logistics provider under a 10-year NNN lease may offer stable cash flow with limited operating expense exposure.
Investor Applications
- Location analysis: Evaluate proximity to transportation corridors.
- Lease rollover review: Monitor single-tenant expiration risk.
- Clear height benchmarking: Compare to market standards.
- Supply pipeline assessment: Track new industrial deliveries.