How to Go About Leasing Industrial Property
Industrial property leasing involves understanding the asset's attributes, landlord requirements and any special occupancy issues that could arise. In short, industrial property leasing involves the ground zero of business, as it's the place where manufacturing and small business activity takes place. It's also one of the first types of real estate to respond to an improving economy. But, how do you go about leasing industrial property? Here are a few tips. 1. Understand the terms: Pre-leasing, Gross, Built-to-suit, and NNN.
Pre-leasing
In today's market, pre-leasing is a popular investment strategy. In this process, a property owner secures a lease with a tenant before its scheduled occupancy. Pre-leasing offers advantages to both the property owner and the tenant. For one, it helps the tenant to enjoy better terms for the lease, thereby maximizing his investment. In addition, pre-leasing commercial properties also help the property owner increase his rental income.
NNN
While most landlords choose a double-net lease, triple-net leases offer several benefits to both landlords and tenants. Both parties benefit from the flexibility and reliability of income generated by triple-net leases. However, landlords may feel limited in the management of their properties. The landlord may not have as much control over expenses, such as increased taxes or insurance. However, the tenant takes on more responsibility and may pay higher maintenance costs, which is good news for both landlords and tenants.
Gross
Gross rent is the monthly amount that the landlord will charge the tenant for industrial space. The landlord may offer rental discounts, usually at the beginning of the lease term. However, if a tenant cannot pay their rent for months, the landlord may find themselves stuck with space. This will leave the landlord with little to no return. To avoid this scenario, it is important to apply for a free month at regular intervals. Here are some tips for landlords on how to get the most out of your industrial property.
Built-to-suit
Generally, built-to-suit industrial property leasing has several benefits. First of all, it is customized to the end-users specifications. The process is much like a credit tenant lease, which means that the potential tenant must have excellent credit and strong financials. Secondly, built-to-suit properties tend to take a long time to construct. In either case, you'll be left without a physical location for your business while your property is being built.
Economic indicators
Industrial properties are a great asset class for investors due to their high rental growth and low vacancy rates. With average vacancy rates in the US hovering around 4%, these properties are great options for investors looking for long-term income. The booming online retail industry is partly responsible for the increased demand for warehouses and distribution centres. These properties support business-to-business and brick-and-mortar retail. The recent movement in vacancy rates, rents, construction, and barriers to entry is also measured by these indicators.
Questions to ask before leasing
Before signing a lease, it's always wise to ask a few questions. The length of the lease and start date are two essential questions to ask before leasing industrial property. What are the consequences of early termination? And how do you know you won't run into any unexpected costs? It's also a good idea to ask about subleasing if you've already signed a lease and are planning to leave the property. This way, you can keep your profits and increase your rent.
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