Investing in industrial real estate has become one of the most profitable decisions an investor can make. I have started recommending most of my clients to look closely at this opportunity, and not lose out.
However, the majority of real estate investors has little knowledge or experience in industrial real estate. So in the table below I wanted to break down what the main benefits of industrial real estate investment is.
What is critical is the appreciation rate of industrial real estate. In the past five years the average appreciation per year in the GTA is 15.1%. See my article here where I fully break it down. This is how investors are able to turn healthy profits in industrial real estate.
| 2020/2021 | Industrial Condo | Residential Condo | Commentary |
|---|---|---|---|
| Price appreciation per annum | 10-15% | 1-5% | For the past 5 years the industrial condo market in the GTA has increase an average of 15.1%. All analyst expect this trend to continuous 2021-2016. |
| Cap rate | 4-7% | 0% Investors assume assets will appreciate | Our historic data indicates that industrial condos appreciate at the same rate as residential condos. However, industrial condos represent a much better return on your investment when you factor in the cap rate coupled with appreciation. |
| Rent Increase Guidelines | No Restrictions | Limited to 2.2% per year | Rates are determined by landlords with zero restrictions in place. However, residential leases are subjected to the Tenant Act. |
| Covenant | Very Strong | Weak | Industrial landlords are able to review 3 years of audited company finances allowing them to accurately assess the risk assume. |
| Lease Term | 3-10 years | 1 year | Industrial leases are long-term. Meaning income with minimal tenant turnover for landlords. |
| Price per sqft | $400-500∼ | $800-1200∼ | Industrial condos offer better value for money when all costs are accounted for. |
| Tenant Act | Heavily weighed towards the landlord. | Heavily weighed towards the tenant. | The landlord in industrial leases hold almost all the rights. For example, if the tenant defaults on their lease, the landlord has the right to terminate the lease, change the locks, and retain all contents within the space. |
| Risk | Diversify your portfolio | Higher risk | The industrial condos market is mostly independent from the rises and falls in residential real estate. This allows you to reduce your overall risk while increase profitability. |
