Central Texas is quickly becoming a hotspot for industrial real estate developers. Cities like Austin, San Antonio, and San Marcos are trending in the right direction both in terms of population growth as well as economic growth. It is for these reasons that industrial real estate developers are choosing to invest their money in these areas. In this post we’ll cover some of the reasons why investors are targeting Central Texas for industrial real estate.
What is Industrial Real Estate?
Industrial real estate is a broad term. It can be defined as all land and buildings which accommodate industrial activities. These activities include, but at not limited to: manufacturing, production, assembly, warehousing, research, storage, and distribution.
Why Invest in Industrial Real Estate?
Texas is home to three of the hottest commercial and industrial real estate markets in the United States. Major corporations such as GM, Facebook, Apple, and even Google have established regional headquarters throughout Central Texas. Along with retail giants moving a large part of the inventory via online sales, it is easy to see how the need for industrial property is steadily increasing. In fact, industrial vacancy rates in the United States as whole are at a mere 5.1%; the vacancy rate is even lower for small to medium size industrial properties.
Today, industrial property is at an all-time high demand. For years industrial property was overlooked and was redeveloped into more attractive assets such as multifamily units, retail, and residential property. This has created a shortage in industrial property stock.
For investors looking to diversify their real estate investment portfolio, they should consider small to medium sized industrial property. These properties are typically less expensive than retail, office, and multifamily developments. Industrial warehouses are oftentimes single tenant properties that have long term leases, meaning investors can have a secure income stream for a long period of time.
The Different Avenues to Owning Industrial Property
The beauty about industrial property investing is that investors have multiple options at their disposal for how they can invest. The three most common avenues investors can own and operate industrial property are Value-Add, Market Value Purchase, and Land Development.
Value-Add
One of the most common avenues to owning and operating industrial properties is the Value-Add method. Investors find outdated, or neglected, industrial property and renovate it. While this type of investing does typically require more capital up front due to bringing an existing property in-line with market standards, this option can be very rewarding. Subsequent investor strategies such as buy/hold, or buy/sell can make this is very profitable method for industrial investment. To get started, consider partnering with a local industrial redevelopment firm who knows the market area and has experience in industrial property investments.
Market Value Purchase
Another, more traditional, method of industrial property investment is to find industrial real estate that is already leased or ready to be leased. Buying and industrial property that is at market value is very similar to buying any other commercial asset. Be sure to do due diligence to ensure that returns are at a desirable rate, and that the property is in good enough shape to lease without having to make significant structural improvements.
Land Development
Developing industrial property also has the potential to create profitable returns. With such a low supply in the market, there is a lower risk associated with this kind of development, but of course you will want to analyze whether or not this is the case in your specific market.
Find a piece of undeveloped industrial land. Some commercially zoned land allows for warehouses, so you may not be limited to only industrial land. Next, figure out what it will cost per square foot to build- this is another great reason to have a trustworthy general contractor on your side. You’ll need to know what you can fit on the piece of land that you purchase, and make sure that you will have adequate parking for your development. If the numbers make sense and your market demands the intended product, this could be a great way to own industrial real estate!
Casey Development, Ltd.: Industrial Real Estate Developers in Texas
Beginning your industrial real estate investment is as easy as contacting an experienced industrial real estate developer. Whether a seasoned investor or just starting out, Casey Development, Ltd. is happy to assist you in your search for your first industrial property in Texas. Contact us today to get started.