3 reasons why warehouses are (still) a good investment

Author Johan Quie Read bio
Tags: commercial real estate warehouse investment warehouse
Date: September 7, 2020

Did you know that investing in warehouse real estate is more profitable than most of the other forms of commercial real estate? Let’s investigate the unique advantages of warehouse investing.

We are all aware of the fact that real estate investing has been a popular passive income strategy for quite a long time. One of the best and safest ways to make money in real estate is to invest in warehouses, which are a type of commercial real estate. 

Some people tend to limit themselves by investing in residential real estate, trying to avoid the risk of being associated with warehouse investment. But, commercial real estate, just like warehouses, offers significantly higher returns compared to residential real estate. 

That is due to the fact that warehouses tend to appreciate in value, both from internal and external causes. For example, one internal factor that can influence the value of a warehouse is proactive management. This includes establishing cost-effective improvements on the property, which improves the usability of the property and the overall attractiveness of the property.

External factors may include variations in supply and demand for warehouse real estate. As the local business and market grow simultaneously, more and more people need real estate but space becomes more scarce, hence the increase of each property value.

Let’s explore other reasons why warehouse investment is a smart call.

#1 High level of versatility

Investing in warehouses does not necessarily have to mean it will be used for storage. Space can be modified to be used for practically any other business purpose. Manufacturers can convert the warehouse space into a production site for their goods for example.

Warehouse spaces are also a great option for club space, restaurants, offices, or even smaller retail spaces. Warehouse space is very flexible and you can convert it into whatever you feel like is the most profitable for you.

Investing in warehouse real estate can be substantially more than just the storage aspect.

#2 Reliable source of passive income

Due to the long-term leases, investors get a fixed amount of passive income monthly. This recurring amount of money for five to fifteen years for the duration of the contract is passive once the property is leased up with the tenants, other than monthly maintenance and management.

Even though we have experienced many ups and downs in the CRE market, warehouse spaces continue to be one of the top choices for investors who are looking for long-term rewards and profit. Investing in warehouse rent estate is a smart way to get your hands on an asset that, not only is likely to appreciate over the long-term but will also provide a stable source of passive income.

#3 Businesses compete for logistical space

When speaking of logistics, the international term for industrial warehousing is creating some new competition in the secondary CRE markets. Demand for these types of assets is outperforming retail and office, and it is the CRE with one of the highest demands across the globe. With the low cap rates, secondary markets are proving to be very viable options now that primary asset prices are on the rise, all in efforts to move products and goods faster.

When it comes to investments and choosing where to invest the money, many people are drawn to residential properties. However, commercial properties can, and usually are, more profitable in many ways. 

Despite the weakened economy and the housing sector struggling to gain traction, the demand for warehouse space is great. This alone can benefit the entire housing sector. Those investors who take advantage of this situation and act fast may be rewarded accordingly.

We hope this introduction to warehouse investments inspires you to take the next step. Always do your homework and research it thoroughly, as well as consult a fiduciary financial professional before conducting any major warehoused investments decision.