Industrial Real Estate: Types, Uses, and Investment Opportunities in Florida

Industrial Real Estate is just not well understood, at least in my opinion. I think people often believe an Industrial Property has a smoke stack extending from the roof, with a few dozen broken windows, and was built 100 years ago. Today’s Industrial Real Estate Market looks a lot different than that, especially in Florida. Let’s dig into some this asset class, hopefully you’ll find something in my ramblings valuable!

For a number of years industrial was treated like the child everyone payed the least amount of attention to. Covid changed a lot of that, and the pendulum swung the other direction. Along with Multifamily, Industrial became the darling of Commercial Real Estate. It made sense right? If the world is going to ecommerce, and having less or a traditional retail experience, you’ve got to store the good somewhere that people are purchasing online. That just starts to scratch the surface though. Consider these broad and sub categories within Industrial Real Estate; manufacturing, warehouse, small bay, IOS (Industrial Outdoor Storage), Omni Chanel, Last Mile, Self Storage, Cold Storage, Flex (think about creative office space), and I haven’t even exhausted my thoughts. I bring this up to make the point that I believe there’s a place for every investor within the Industrial Real Estate space. At the very least adding the asset class to an existing portfolio could/should help smooth out risk.

A lot of supply is planned to come to market, or already has hit the market. How does this affect you as a purchaser or a Tenant, let’s look at some of the scenarios. If you own a home you probably have people who help with upkeep. Landscapers, pool cleaners, painters, AC repair company, exterminators, septic service, or if you’re like me and you need a new fence, a fence company. One thing these companies likely have in common is that they’re not huge national franchises. They’re small business owners. Do you know what type of property they’re likely not Leasing? The new Class A warehouse you see that was just built and is 300,000 square feet in size. This is where small bay warehousing comes in, and it’s a lot of what I do in the Industrial Real Estate market. I’m bringing this up because there is a dichotomy that exists in Industrial Real Estate. The supply that’s being built is being built, in large part, by very large Industrial Landlords with an aim towards very large Industrial Tenants. This creates an opportunity for an Investor to purchase a smaller property, which should yield relatively stable cash flows because your vacancy levels should be low. For a Tenant the construction of the new Class A spaces also creates a problem, there’s not a lot of inventory being created with you in mind. This oftentimes forces a small business owner to turn towards and SBA loan and purchase, as Leasing, in many scenario’s becomes cost prohibitive.

I live in Jupiter, in Palm Beach County. I’ve witnessed a very large expansion West of Residential Real Estate Developments. I’ve seen some rezoning of space to Industrial from Farmland (Bedners in Boynton comes to mind, or Bee Line Highway). But here’s the thing, if you’re in a more densely populated area, do you think it’s more likely you’ll see an expansion or Residential, Office, and Retail zoning, or Industrial? If you just said Industrial, I just don’t agree, at all. If anything towns and cities are trying to expand Industrial Zoning, not expand it. That lack of zoning I see as problematic for business owners trying to Lease space, but beneficial to those who own, or want to own, Industrial Real Estate.

Let me wind down my ramblings with some considerations investors, or prospective Tenants, should consider in an Industrial space. Access to highways is usually really high on the list. The easier your space is to highway access, the more desirable it will be to most Tenants. Do you have grade level, or dock high doors? Grade level doors are what most small business owners will be ok with, dock high doors are needed if you’re having tractor trailer trucks deliver you goods. If you are having deliveries and need dock high doors, is there adequate space for the truck to turn around, or get out, or your building once the delivery has been made? I’ve been to multiple locations with dock high doors that have never been used because there’s no turn around space, it blows my mind. Finally what’s the clear ceiling height? Low ceilings, say below 20 feet can be an issue for a number of Tenants. The more modern buildings are going up to 40 feet allowing more, and more, racks to be stuffed into the space. If you own an older small bay with low ceiling heights, just know your Tenant pool may be limited.

Considering adding some Industrial Real Estate in Florida to your portfolio? Thinking of Leasing out some Vacant Industrial Space? Let’s talk, give me a call at (786)443-7203 or email me at casey@caseycre.com