The Case for Industrial as a First Commercial Investment

New investors interested in commercial real estate often gravitate toward multifamily for their first deal. It’s not surprising. Everyone needs a place to live, and that’s not likely to change. But industrial properties, like warehouses and outdoor storage facilities, have advantages worth weighing.

Higher cap rates

Multifamily is the most competitive corner of commercial real estate, and all that capital chasing apartments compresses returns. Industrial cap rates are typically higher, which means you pay less for the same cash flow.

Less tenant turnover

Apartment tenants often leave after a year or two. Industrial leases commonly run multiple years, which means fewer turnover costs and lower leasing commissions over your hold period.

Tenants carry more of the load

Industrial leases are often triple net (NNN), meaning the tenant pays its share of operating expenses: taxes, insurance, and common area maintenance. Industrial tenants are also frequently responsible for maintaining their own space. The result is a less management-intensive investment than a building full of apartments.

Long-term demand drivers

Industrial demand is driven by durable trends: e-commerce growth, nearshoring and reshoring of manufacturing, and the expansion of last-mile delivery networks.

Specialize either way

Whether you choose industrial, multifamily, or another property type, the important thing is to specialize in one property type and one geographic area to start.