Industrial warehouse properties can attract strong investor interest, but that does not mean every industrial warehouse is a good investment. One of the questions I am asked often is whether an investor should buy a particular warehouse today. The answer cannot simply be based on whether the overall market is strong.
Every property needs to be evaluated on its own fundamentals. A strong market can create opportunities, but investors still need to understand the individual property, its location, its functionality, and how it compares with newer properties entering the market.
When I look at an industrial warehouse as a potential investment, there are several questions I start with.
Is the Location Close to Major Transportation Routes?
Location is one of the first things I consider when evaluating an industrial warehouse. For industrial properties, access to transportation routes can be especially important because logistics and distribution depend heavily on how efficiently goods can move in and out of a facility.
A property may look attractive on paper, but investors should understand how its location supports the needs of today’s industrial users.
- Is it close to major transportation routes?
- Can tenants efficiently access the facility?
- Does the location support the type of logistics activity the building is designed for?
These are important questions because an industrial property is not evaluated only by the building itself. The surrounding transportation network is also part of the investment story.
A location that works well for today’s industrial users can be an important consideration when evaluating the long-term potential of a property.
Does the Building Meet Today’s Logistics Requirements?
The next question is about the building itself. An industrial warehouse needs to meet the needs of today’s users. Industrial operations continue to evolve, and investors need to consider whether a property can support the logistics requirements that businesses have today.
This means looking beyond the basic fact that a building is classified as a warehouse. The question is whether the building remains functional and competitive for modern industrial users.
A property can have a good location, but if the building does not meet the requirements of today’s tenants, that can become an important consideration for an investor.
This is why investors need to look at the fundamentals rather than simply assuming that demand for industrial space makes every warehouse a good investment. Strong demand can create opportunities, but the individual building still needs to make sense.
Can It Compete With Newer Industrial Properties?
Another question I ask is whether the property can compete with newer, 21st-century industrial properties. This is an important part of evaluating an industrial warehouse because investors aren’t looking at the property in isolation. There are other buildings in the market.
Some may be newer. Some may offer features that older properties do not. Some may be designed around the needs of today’s industrial users from the beginning.
That creates an important question for an investor:
Why would a tenant choose this property instead of a newer alternative?
The answer can vary from property to property. An existing warehouse may have a location that works particularly well for a tenant. It may have other characteristics that make it competitive within its market.
But investors should understand how the property fits into the larger industrial landscape.
Looking only at current demand without considering future competition can leave out an important part of the investment analysis.
A Strong Market Does Not Mean Every Warehouse Is a Good Investment
This is probably one of the most important points I would make to anyone considering an industrial warehouse investment.
Even in a strong market, not every warehouse is a good investment. It can be easy to look at strong demand for industrial properties and assume that any warehouse should perform well.
But real estate is property-specific.
Two warehouses can be in the same general market and have very different investment stories. One may have a location that provides strong transportation access. Another may be located farther from major transportation routes.
One building may meet the needs of modern logistics users. Another may have limitations that make it harder to compete with newer properties. That is why the market alone should not be the only factor driving an investment decision.
Every Warehouse Tells a Different Investment Story
When evaluating an industrial warehouse, I believe the most important starting point is the fundamentals.
- Look at the location.
- Look at the building.
- Look at its ability to meet current logistics requirements.
- And look at how it compares with newer industrial properties.
These questions can help investors move beyond the simple question of whether industrial real estate is currently in demand.
The better question is whether this particular property has the characteristics that make it worth considering.
That distinction matters.
An industrial warehouse may be located in a strong market, but investors still need to understand what makes that specific property competitive.
Should You Buy This Industrial Warehouse?
There isn’t a one-size-fits-all answer.
Before making an investment decision, take a closer look at the property’s fundamentals.
Ask:
- Is the location close to major transportation routes?
- Does the building meet today’s logistics requirements?
- Can it compete with newer 21st-century industrial properties?
- What makes this particular property competitive?
- What is the investment story behind the building?
These questions can help investors take a more detailed look at an opportunity instead of making a decision based solely on broader market demand.
At the end of the day, every warehouse tells a different investment story.
Watch the Video
Want the quick version?
In my latest short video, I discuss the question I am often asked: Should you buy this industrial warehouse?
I explain the fundamentals I look at when evaluating an opportunity, including transportation access, current logistics requirements, and competition from newer industrial properties.
Watch the video on YouTube:
https://www.youtube.com/shorts/V4qs-Hsg5E8
If you’re a CRE investor evaluating an industrial warehouse or another commercial real estate opportunity, don’t rely solely on overall market demand.
Take a closer look at the property itself and the fundamentals that support its long-term competitiveness.
Have an industrial property you’re considering? Let’s talk.
Larry Emmons, SIOR, CCIM
m 248.705.9115 | t 248.447.2707
larry.emmons@nmrk.com
Let’s discuss your next CRE investment opportunity.