Office and retail properties are among the most popular commercial real estate Investments. However, warehouses have emerged as a lucrative industrial asset. Despite the profit potential of these properties, should you buy and resell these facilities? To answer this question, you must weigh the pros and cons before investing your money.
The Pros of Warehouse and Distribution Space Investment
The warehouse and distribution spaces are a worthwhile purchase. There’s strong market growth for these properties. This growth is due, in part, to online commerce and server farms that need storage facilities. Sales for these properties reached almost 500 billion dollars in 2017. Here are a few benefits of buying, selling, and leasing in commercial real estate:
- Tax Deductions – You can get a variety of tax write-offs. Common deductibles include repairs, maintenance, depreciation mortgage interest, and taxes.
- Recession-Proof – Any property is susceptible to financial losses due to economic downturns. However, warehouses and distribution spaces are the least affected because they either appreciate or return value over time.
- Solid Leases – Warehouse and distribution facilities generally have low operating costs, few landlord responsibilities, long-term leases, and strong credit tenants.
The Drawbacks of Warehouse and Distribution Space
Sales for these industrial assets have increased 10 percent every year in recent years. This is evidence of a healthy seller’s market, so this is a prime time to buy and resell warehouse and distribution property. Despite this positive investment outlook, there are a few downsides. Below is a brief list of disadvantages you need to know about as an investor:
- Capital Losses – What if you need to sell the property before you’re ready? There’s a strong likelihood you’ll incur a poor ROI if the facility sells for less than what you paid.
- Single-Tenant Income – Most warehouse and distribution properties only house one tenant. This means all your income earning potential depends on that one occupant. Without multiple tenants, there’s a greater risk of financial loss.
- Not Flip-Friendly – Looking for a quick flip and a fast profit? If so, investing in industrial property is not the best option. The buying and selling process is lengthy within the industrial real estate sector.
Let Us Assist You with Your Commercial Real Estate
Royal Commercial Real Estate has the specialized knowledge you need for making a wise decision. We can guide you through the process of finding, buying, and selling warehouse and distribution property that results in a profitable transaction. Contact us at 480-253-9431, email at info@royalcre.com, or fill out our online form to learn more.
