9 Things to Consider Before Investing in Industrial Real Estate

Industrial investment assets come in a wide range of sizes and purposes. Commercial and industrial assets could vary from a small industrial space to a huge distribution and logistics center.

The road network condition is a major consideration for investors in industrial property. They offer connectivity to cities via motorways and freeways, which connect prospective tenants with ports and docks for freight. The economics, the closeness to infrastructure, and interest rates are the primary properties market drivers.

Considerations Before Investing in Industrial Real Estate

If you decide to invest in industrial real estate in Newfoundland, you have to know that it is an investment that you should not take lightly. The following is a list of checks and balances to perform before purchasing during the due diligence period. There are nine points that you must not overlook:

1. Appraisal and Survey

To confirm the worth of the property, request an exact copy of the latest appraisal. The appraisal can provide important information, like comparable information about the building. The survey will assist in determining the inclusions in the purchase, which could be different from the knowledge that the current owner of the building is aware of. Understanding the easements and restrictions can help determine if the property is appropriate to be used for its intended purpose.

2. Floor/Site Plan, Engineering and Environmental Reports 

Suppose you can take a look at a DVD that has CAD drawings. This will help you plan for future space requirements. Engineering and environmental reports for Saint John are important because they are a good source of knowledge and understanding.

3. Operating Expenses History and Budget

To calculate the property’s net operating profit, gather data for at least three years. The more precise your data is, the more reliable your cash flows projections will be. What is the Pro-forma for this year’s budget? Are the owners planning to earn an income?

4. Capital Improvements History

Have the structures been maintained? Do you have any issues that you will need to fix soon?

5. Title Policies, Deeds, and All Contracts

Make sure the title is ad-hoc and not subject to any limitations. Get copies of every building contract, including vending service, overnight deliveries, and alarm monitoring.

6. Contracts and Certificate of Occupancy

It also includes unrecorded and registered agreements that grant rights to a property to anyone other than the current owner, whether through an easement, license, or other means. Do you have proof of occupancy in place, and If not, is it necessary?

7. Building Permits and Taxes

Get copies of all permits granted for major changes, additions, or repairs after the certificate of occupancy was issued.

Take documents of your most current tax invoices for the property and any new notices regarding new or pending assessments that affect the property. Learn about taxes after you have bought the property.

8. Service and Maintenance Contracts

Examine all maintenance and service contracts, and include contact information and telephone numbers, such as snow plowing, landscaping cleaning, pest control garbage, disposal sprinkler systems, alarm systems, or security.

9. Guarantees and Current Leases

Learn about the warranty for the building, which includes ones for roofs, HVAC units, and other things.

What is the average rent roll duration? Are you expected to find tenants in a matter of hours? What are the current costs for the lease?

This list does not constitute legally binding advice. However, reading these subjects before deciding to invest in industrial properties could place you in a better position to negotiate.