- This video will be about
the basics of industrial real estate.
And I've got a really good hook
to get you interested in learning more.
That's a terrible pun
but if you didn't immediately click off
I know you're interested in the topic.
Industrial real estate is a massive industry,
but it's just not that well understood.
Take the Wikipedia page on commercial real estate,
for example,
which divides commercial properties into five categories
office, retail, multi-family, land and miscellaneous.
While we can't expect Wikipedia to be the de facto source
for everything.
The omission of industrial real estate
as one of the main categories illustrates how it might not
be as highly thought after as office or retail might be.
It's surprising when industrial real estate gets overlooked
because its contribution
to the overall economy is significant.
A recent report showed that there's over
20 billion square feet of industrial real estate
in North America with the aggregate value
surpassing $1.5 trillion.
Having established that the industrial real estate market
is an important cog in the overall economy,
the next step is to break it
down into a few subcategories, manufacturing,
these are facilities used for the assembly, production
or manufacturing of raw, semi raw or finished materials.
If you can picture a big factory
that's a good start.
Warehouse,
generally, this would include buildings used for storage,
distribution, logistics, and truck terminals.
Picture buildings with very high ceilings
and racks of materials,
going into a Costco will actually give you
a pretty good idea of what a warehouse looks like.
Flex, these are industrial buildings used for other purposes
than manufacturing or warehousing.
Examples include laboratory space, showroom,
or even straight office space.
Sometimes we'll even see unique or specialized uses
for industrial properties, such as self storage,
bottle Depots and even some churches.
But the majority of industrial properties
can either be classified as manufacturing, warehouse
or flex, beyond the functionality of the building,
most municipalities will also have specific
zoning classifications for industrial properties.
The terminology and processes
will vary across different markets,
but the key element is to ensure your municipality
will permit the specific type of industrial operation
within the certain building.
Every company will also have a unique set of needs
which makes the act of choosing a location
which is sometimes called site selection,
a critical component of the overall process
of finding the right property.
A logistics company, for example, it might need
to ensure the building has adequate loading areas
for shipping or a certain ceiling height or proximity
to major thoroughfares and manufacturing company conversely,
will put more emphasis on electrical power
or proximity to customers or suppliers.
So there are a lot of elements that go into the equation,
but the process starts with having a solid understanding
of what a company needs combined
with finding a building that is compatible.
To summarize this all we can use something called
abductive reasoning, which is making a conclusion
based on a set of observations.
The most common example of this is the duck test.
If it looks like a duck, swims like a duck
and quacks like a duck, then it's probably a duck.
Well, if a property looks industrial,
functions for industrial purposes
and is zoned industrial,
then it's probably an industrial property.
What I find fascinating about industrial real estate
is that it quietly works out of the spotlight
and that spotlight hasn't been overly kind
to some of the other asset classes, particularly of late.
Do a search for retail apocalypse
or the death of office space
and you'll be inundated with news articles
by various pundits, somehow able to predict the future,
but industrial keeps chugging along.
I suspect we'll even see more demand
for industrial real estate in the future
whether it's companies increasing their inventory levels
to avoid running out of stock
or the continued rise of e-commerce or some office
or retail tenants being attracted
to the typically lower rates
an industrial property can offer.
I think there's a good chance industrial outperforms
other asset classes for the foreseeable future,
who knows?
Industrial real estate might perform so well
that someone even updates the Wikipedia page.
If you've got any value from this video,
I'd greatly appreciate you liking it or commenting below.
And thanks for watching, I really do appreciate it.
Have a great day.