Displaying items by tag: investment property
Investing in industrial real estate can seem daunting at first. And if you’re unfamiliar with what to look for when purchasing industrial property, it can seem scarier still. However, with the right investment property advisor working with you, you can reap a long list of benefits. In this article, we’ll cover the top five reasons to consider industrial property investment in Denver.
But first, let’s ensure you have a strong understanding of what defines industrial real estate.
What qualifies as industrial real estate?
Industrial real estate is a type of commercial property that typically includes warehouses, factories, logistics and distribution centers, manufacturers, depots, and industrial businesses. Industrial real estate is often considered to be one of the lowest-risk and most appealing asset classes because it can provide a more consistent cash flow than other types of real estate investments, such as office with gross leases or ‘non-essential’ retail. However, just like all types of investing, it’s important to do your research.
Why invest in industrial real estate
E-commerce in America is booming. In fact, as many as 75% of people in the United States shop online at least once a month, and the vast majority of those consumers shop online more frequently. The number of online shoppers is only expected to increase in the coming years. Fast delivery of those online purchases to the consumer is necessary and well-located industrial distribution facilities help make same-day delivery possible. All that’s to say, real estate investors are quickly realizing that industrial real estate can be a profitable place to invest. Here are five reasons why.
1. Hassle-free passive income
One of the biggest benefits of investing in commercial real estate is that it’s a hassle-free way to earn passive income. Compared to multi-family (apartments), hospitality (hotels), office and multi-tenant retail investments, industrial investment properties require far less maintenance due to NNN lease structures, have lower upfront costs as it relates to tenant improvements and real estate commissions/fees and it typically has lower vacancy rates (depending on the market), which ensures a more steady stream of rental income.
2. Higher yields
Historically, industrial real estate investments offer some of the highest yields of any real estate sector. On average, industrial properties generate a cash-on-cash yield of 6%-7% on average, compared to 5%-6% for stand-alone retail & apartment complexes. The yield difference between 5% and 7% is not 2% as you might think...it is a 40% higher yield. A 5% yield will take 14.4 years to double your money. A 7% yield will only take 10.3 years (using the Rule of 72).
3. Fast and easy to build
On average, industrial properties are built in a year or less. Thanks to the relatively simple design, tilt-wall construction and lower-density submarkets (with less ‘neighborhood approvals’ required), industrial buildings are often built faster and can quickly be occupied once finished. The same cannot be said for office buildings, apartment complexes, or retail spaces. And with e-commerce taking up more market share with each passing year, it’s easy to see why investors opt for industrial investments.
4. Easier to liquidate
At one point or another, you’ll want to exit your industrial investment. The good news is, with increasing demand for online shopping, there’s always going to be a retail business (tenant) that wants to lease a well-located industrial space. With high tenant demand, industrial real estate properties can lease quickly, sell fast with a large pool of investors interested, giving you a strong incentive to invest.
5. Affordable re-leasing costs
One of the least attractive parts about investing in real estate is preparing the space for a new tenant. But let’s face the facts: people’s destructive habits are often more expensive to repair compared to items like machinery and equipment. When a lease ends at an apartment complex, office building, or retail space, there’s a lot that needs to be done to get the vacant space ready for the replacement tenant. Between leases, you may have to replace carpets, tear-down, rebuild and repaint walls, attend to mechanical systems that may need upgrades or replacement, and complete other costly and time-consuming steps to get the space ready for a new tenant.
But with industrial properties, the maintenance needs between leases are much more basic and the new tenants typically pay for part of, or all of, the required upgrades. Since industrial spaces generally are occupied by a lower-density workforce and less visitors, the releasing costs are less expensive.
Learn more about industrial property investment in Denver
If you’re ready to take the next step and seek an investment property advisor, reach out to us at Fountainhead Commercial. We offer industrial real estate investment property representation for both investors and owners/occupants who are considering buying or selling industrial real estate.
Contact us today to learn more about industrial property investment.
Investing in real estate has proven to be a great way to build wealth. Commercial real estate (CRE) investments, in particular, can provide consistent streams of income compared to residential real estate properties. If you’re interested in commercial real estate investment opportunities in Denver or elsewhere in Colorado, you’ve come to the right place. We’ve put together a comprehensive guide of need-to-know tips for commercial real estate investing in the metro area as well as statewide.
Investing in commercial real estate (CRE) can yield secure but modest returns as well as high investment returns if you go about it strategically and understand the risks. Comparatively, U.S. Treasury yields are at/near all-time lows in 2020. In this article, we’ll cover the ins and outs of commercial property investment in Denver so you can determine if it’s right for you.
Let’s examine the different types of investment.
Investing in commercial property has a high barrier to entry, but it can be an extremely lucrative route for those who choose to do it right. Investing strategically is the key, though. Without an investment property expert guiding your decisions, you won’t be able to achieve the returns you’re looking for. With many years of experience serving as the commercial broker for those investing in commercial property, we’ve developed the industry prowess to help our clients build a portfolio of investments that is right for them. Let’s discuss what you need to know about the commercial real estate investment opportunities available.
The responsibilities of a commercial real estate landlord are extensive and when you own multiple large properties, fulfilling the marketing and leasing responsibilities that make your investments highly profitable becomes even more challenging. More often than not, the daily efforts of an experienced landlord representative can significantly improve your long-term financial outcomes. That’s the decision this Texas-based client made and it paid off in spades.
The client owned multiple Class A and Class B multi-tenant office properties in 6 major cities, including Dallas, Texas. They engaged Lowrey Burnett to handle the commercial real estate portfolio marketing and leasing duties. They wanted to ensure an experienced professional was actively working to keep the multiple properties leased to high-quality, credit-worthy tenants.
The client maintains their portfolio in a first-class manner but had some of the most stringent financial underwriting criteria compared to competitive property owners. This can be a major deterrent for tenants when considering various office space options.
Additionally, there were social and economic factors over the eight years Burnett was representing the property owner, including the Y2K fallout, 9/11 terrorist attacks (We Will Never Forget), and the early impacts of the 2008 financial crisis. With nearly twenty years of experience in the commercial real estate industry, Burnett was effective in his role as the landlord representative.
For approximately eight years before moving to Colorado, Burnett consistently kept the mid-rise and high-rise office portfolio leased to 85-95 percent capacity, despite intense market competition, economic headwinds, and other factors noted above.
As the landlord representative for this Texas-based institutional landlord, Lowrey Burnett maintained an 85-95 percent occupancy rate across multiple Class A and Class B office properties in the Dallas area.
If your investment portfolio is underperforming and you want an experienced professional on your team to increase your occupancy and net operating income (NOI), contact the landlord representative at Fountainhead Commercial today.
A Texas-based real estate development company was considering other markets as they continued to grow their brand. In prior years, they had successfully penetrated Austin, San Antonio, Dallas, and, most recently, Seattle, by developing single-family and multi-family properties. They were now exploring Denver as their fifth market.
The client was seeking suitable land for the development of an urban, multi-family condo complex. Having explored a variety of markets, the client knew an experienced broker could be a strong asset to help them find the perfect development parcel late in the development cycle. The client engaged CCIM-designated broker, Lowrey Burnett, to identify sites available for purchase that aligned with the client's location and purchasing model.
Denver was the target market that the client and their stakeholders began considering as the city for their fifth flag - though it was late in the economic cycle. Unfortunately, that meant that many desirable infill urban sites had already been acquired and, in some cases, already redeveloped. The majority of the remaining, available urban development parcels had zoning issues or were excessively priced by sellers who hoped to take advantage of inexperienced or under-represented buyers.
As an experienced buyer's representative, Burnett knew that there were hidden gems left in the city. He performed extensive research to find an under-valued parcel. What he found was a 0.8 acre parking lot that had fallen out of contract, but was situated in an ideal location, just northeast of Denver's Central Business District. Improving upon the already attractive nature of this parcel, the parking lot generated rental income that would offset the client's debt-service expense during the preconstruction phase of the project. Additionally, Burnett was able to negotiate favorable sell-financing to the benefit of his client.
The condo development was underwritten, for purchase pricing purposes, based upon a three-story development. However, the client was able to achieve a much higher-density development that results in a much higher return on investment.
The client successfully closed on the covered-land play, acquiring the parking lot for $3.75 million. Depending on the final project height, the client expects to spend $16 to $20 million on the new development project.
Burnett acted as a buyer's representative for the acquisition of land for development near downtown Denver, Colorado.
A California-based investor sought out CCIM-designated broker, Lowrey Burnett, after selling their family business and the related real estate for $14 million. Because they wanted to defer 100 percent of the capital gains taxes, they were interested in pursuing a 1031 Exchange transaction. The client enlisted Burnett's guidance and expertise to adhere to the IRS restrictions that make such a tax-deferral transaction possible.
Though based in California, the client was interested in pursuing commercial properties nationwide. With a $14 million acquisition budget, Burnett presented the client with a variety of investment options, including investing in a single property or diversifying into several different properties, as well as numerous types of commercial real estate, such as single-tenant industrial, multi-tenant retail, single-tenant flex, multi-tenant office, or single tenant medical office building (MOB). The client consulted with their financial advisor and tax attorney to ensure they made a decision that supported not only their current cash flow needs but also their long-term goals.
The client opted to incorporate a number of highly-specific diversification strategies, including geographic, product-type, tenancy, lease expiration, yield diversification, and more. Because of this, as well as the strict deadlines required to comply with 1031 Exchange rules, Burnett set to work immediately to identify properties that met the client's requirements. Of all the options presented, the client decided to pursue the following:
- An industrial single-tenant asset in Houston, TX - international credit tenant
- A multi-tenant retail asset in Kansas City, KS - national and local credit tenants
- A multifamily DST in Atlanta, GA - institutionally managed Delaware Statutory Trust
- A single-tenant retail asset in Augusta, GA - national credit tenant
The next steps involved negotiating deal terms with each seller that afforded the client the investment returns they sought, completing the necessary due diligence for each investment in each market, and closing all transactions relatively quickly to adhere to the 1031 Exchange requirements.
Burnett, a leading buyer's representative, not only successfully negotiated mutually-agreeable deal terms for the purchase of multiple commercial properties but he also coordinated travel to each city while thoroughly reviewing all due diligence materials. The purchase price for several of the properties was negotiated down more because of due diligence findings. All investment properties were successfully acquired within the required 1031 Exchange timelines and 100 percent of the client's captial gains taxes were deferred, saving them $5.3 million.
Burnett served as the buyer's representative during a successful 1031 Exchange of investment properties across the United States.
If you're looking for an experienced commercial real estate investment broker to help you navigate a 1031 Exchange transaction and defer 100 percent of your capital gains taxes, contact Fountainhead Commercial today.
At Fountainhead Commercial, we take pride in our expertise and we are always excited to share what we know with clients looking for investment property insight. When a Costa Rica-based client expressed interest in investing in the United States, they engaged Lowrey Burnett, an expert buyer's representative, to share his experience and expertise in the commercial real estate investment marketplace.
The foreign client had a unique investment portfolio already, but sought to enter the American commercial real estate market. After performing a nationwide search for suitable investment options that satisfied the client's specific investment criteria for their first U.S. property, Burnett identified a fully-leased, multi-tenant office asset with national-credit tenant, GoreTex, occupying 75 percent of the property.
Investing in a foreign marketplace, whether in the United States or elsewhere, always poses unique challenges for an investor. Clients often need and want comprehensive insight regarding the various market conditions, influences, and investment options, including details on expected investment returns, types of investment properties and their characteristics, tenants and leasing requirements, as well as the legal, accounting, and financing solutions before making a fully-informed decision. CCIM-designated broker, Burnett, having almost 2 decades of experience in the commercial real estate space, was thrilled to share his best-practices and provide direction regarding the state of the market in various cities in the United States.
Educating a client regarding the commercial real estate investment acquisition process is professionally gratifying for Burnett. As a Certified Commercial Investment Member (CCIM), walking a client through the possible outcomes (Most Likely, Most Aggressive, Most Conservative, etc.), developing an investment strategy together, executing on that strategy, and seeing each client reach their financial objective is why Burnett is passionate about what he does.
The client was able to close on their first investment acquisition in the United States for a total of $12.2 million. Ultimately, $200,000 was negotiated off the list price to better position the investment for long-term success.
Burnett served as the buyer representative during the investment acquisition in Phoenix, Arizona. The client closed on a multi-tenant office building providing an above-market yield.
If you're looking for a CCIM-designated broker to execute a strategy to diversify your investment portfolio, contact Fountainhead Commercial today.
A repeat client, who has spent several years in the commercial investment space, came to CCIM-designated buyer representative, Lowrey Burnett, when the investor was ready to expand his commercial real estate portfolio. He had specific investment return criteria and was prepared to scour the country for the right, positive cash flow commercial property.
This search for an investment property came with unique criteria to ensure the new asset would align with the investor’s overall investment strategy. The buyer wanted a well-located, fully-leased, single-tenant asset that would support definitive investment yield requirements. There were high expectations for this investment property and Burnett was up for the challenge.
He identified several best-in-class investment options in various states and the client selected an ideal property in Florida. Burnett tackled the due diligence, negotiation and closing process head on.
One of the many suitable options Burnett proposed to the client as a buyer's representative was an industrial distribution warehouse in a highly sought-after submarket that not only met the buyer’s investment yield requirement but also had a long-term, national-credit, single-tenant lease in place. The location provided tremendous access to the Interstate system which will always be desirable for companies and tenants that value a logistical competitive advantage. The next step was to ensure that the buyer’s purchase offer was the most attractive in a highly-competitive market.
Our client successfully closed on the investment acquisition of the 60,650 square foot industrial property that is 100% leased to the largest tire distributor in the United States. This industrial property met and, in some cases, exceeded the client’s expectations and continues to perform as a strong cash flow investment.
Burnett, a Certified Commercial Investment Member (CCIM), acted as the buyer representative for the investment acquisition of a Pensacola, Florida industrial distribution warehouse that was 100% leased to a national-credit tenant.
If you want to expand your commercial real estate investment portfolio and are looking for a trusted, experienced buyer's representative to lead the search for and acquire a high-performing asset in Colorado or anywhere in the United States, contact the buyer representative at Fountainhead Commercial today.