INVESTMENT STRATEGY
WAREHOUSES
Is Warehouse Investing Sexy? WAREHOUSE SPACE CAN BE A HIGHLY LUCRATIVE AND LONG-LASTING INVESTMENT VEHICLE.
By Susan Reilly
nvesting in warehouse space doesn’t sound very sexy
square footage of the property, compared to something like adaptive reuse office space. 4 Tenants, too, are different. In warehouse rentals, they tend to be more dependable, especially if they’re an established business. 5 Finally, warehouse tenants commonly make improvements to the property at their own ex- pense. Rarely do vacation rental tenants, apartment dwellers, or office lessees improve their space at their own expense.
Location is another factor expe- rienced real estate investors look for in a warehouse space that would be a solid investment. According to Michael Poggi of the Millionaire Investment Group based in Ft. Lauderdale, Florida, location is the most important factor. It is quickly followed up with satisfactory results from the analysis of ROI and CAP rate. Poggi frequently requests rent rolls and copies of tenants’ leases before purchasing a property to proj- ect investment returns several years in advance: “Knowing what’s in the tenant’s lease specifically is import - ant—what is their financial contribu - tion and what is mine as the owner?”
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compared to Airbnb rentals, or apartments, or adaptive reuse office spaces. But warehouse investing is hot in the minds of sophisticated investors—and there are many reasons why. According to Crexi, the sharp increase in e-commerce during the last decade has fueled the need for storage facilities. This need is well known for giants like Amazon. But the need also exists for folks like your local plumber and the neighborhood HVAC dealer. ADVANTAGES OF WAREHOUSE INVESTING Warehouse investing has several advantages not found in other leasable investments: 1 Leases are usually structured over seven to 10 years as opposed to short-term properties that rent weekly or apartment complexes that typically lease annually. 2 Warehouse rentals have the benefit of triple-net
ADDITIONAL CONSIDERATIONS
Where warehouse investment is like other leasable investments is in the depreciation. Tax deductions for commercial buildings in this asset class and others can be depreciated for 39.5 years. When considering a warehouse property for an investment, the common theme always boils down to the value of the tenants themselves. Investors should go to great lengths to discover how reliable tenants are to make lease payments as agreed for the duration of the lease. What is their rental history? What is their credit record? What is their reputation in their industry and in the market?
THE TEAM To be successful in investments, Poggi advocates using various professionals. He recommends
developing relationships with key players such as:
Legal experts to ensure all contracts and agreements are legally sound and to be acquainted with the property for possible future legal representation with tenants or insurance carriers. Real estate brokers to locate worthy warehouse investments
(NNN) leases, making the tenant responsible for the ever-rising costs of taxes,
insurance, and maintenance. 3 Rental income is generally higher due to the larger
and perform competitive analysis of the property,
40 | think realty magazine :: november – december 2023
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