THIS IS MY EIGHTH POST ON UNDERSTANDING MONEY TOOLS
Money! Money! Money!
Now let’s discuss some basics of industrial real estate. We will break this category down into
two types, light industrial and heavy industrial.
Industrial real estate is down the totem pole in real estate
from commercial that we have talked about already. Most cities with proper planning have designated areas for
light industrial and heavy industrial, being away from residential areas and
many times tucked in behind commercial/retail or on its own where it can’t be
easily visible. There are examples
where cities wish they could plan all over again. A good example of very little transition in zoning is in
older Houston. You have prime
River Oaks and close by mixed zonings.
I have seen this in some towns including the Mid-West where you have
commercial, then residential, then industrial and then back to residential as
they didn’t think ahead and plan for town/city expansion.
Industrial is also associated with transportation, manufacturing
and storage. With transportation
to and from these sites extremely important these zonings are common to
railroad lines and road arterials, state and interstate , highways for trucking
access. These days well planned
cities also require an industrial park to be set back from the road, and many
times landscaped nicely with an attractive entry.
Light industrial is clean, no manufacturing/processing and
normally has an office in conjunction with warehouse for assemblage, storage,
etc. Rents per square foot are
considerably less than commercial for obvious reasons, the income per square
foot generates far less. Light
industrial usage can include, pool supply companies, small newspapers as most
have gone to paperless, auto body shops, mini-storage units, etc. This type of industrial creates less
noise, less light disturbance and less traffic than commercial/retail and it is
more destination types of businesses.
Heavy industrial will be in city designated areas at even a
lower level of real estate. This
has manufacturing as well as distribution. The Environmental Protection Agency watches the pollutants
carefully. When buying a property
that has, or has had known heavy manufacturing make certain soil tests are
completed. If the soil is contaminated
the EPA can hold you, the owner, accountable for cleaning the dirt, and that
cost is not easily determinable. I
have seen several properties that are not salable because of the question of
costs and liabilities are not definable.
The government can hold any past owners liable going back to the
original grant for the land.
Financial analysis for these properties is basically the
same as we previously discussed in commercial. It’s all about location, age, quality of the building and
construction, and cash flow. One
difference in analysis would include looking at cubic footage rather than just
square footage. If a building has
30 foot ceilings it is perhaps more valuable than a building with 20 foot
ceilings. The same with loading
docks, and other requirements for today’s higher standards for shipping,
computer usage/electronics and storage.
As with all real estate, don’t forget the real estate broker
representing the sale of the property represents his client, the owner, and is
trying to get the highest price for that person or entity.
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