Who is Investing in MINI WAREHOUSES (<1,000 sq ft) ?

[James Cerenzie]

BP,

How many people out there are currently investing (or considering investing) in 'MINI WAREHOUSES' (500 - 1,000 sq ft over-sized storage units) which have A) power outlets, B) fire suppression equipment, and C) you can use to hang a business license at / conduct business operations?

Personally I see a ton of demand for small spaces for business to utilize for operations, and see this property type as being especially resistant to Real Estate cycles.  I'm considering buying a deal (see below), and would be appreciative for anyone who has been there or done that. 

I'm also thinking about potentially developing a similar complex in the future OR sub-dividing a vacant industrial building (20,000 - 50,000 sq ft) into small spaces.

See below for a DEAL SUMMARY, which is provided only so you can understand more of what I'm asking for feedback on.

- Located in Salt Lake City, UT
- 20,000 sq ft light industrial building, which was purpose-built (in the 70s) for 40 individual units
- Units are all in the 500 - 700 sq ft range
- Cinder block construction and each unit has a rollup and 'man' door
- Building is 100% leased at $1.00 - $1.20 / FOOT, so not too bad for a cinder block building in Utah
- Tenants are able to hang their business license at these locations, and a lot of current tenants are Automotive-related, Tradesmen (woodworking, welders), or similar.  

[Beckie Reynosa]

James, 

I agree with Carson.  As a commercial loan officer, I see this business model or similar business models quite often.  Flex space is very desirable IF it is located in the right place.  Most of my clients in the downtown Salt Lake area are getting quite a bit more in rent per square foot, but many of my clients are providing remodeled and modernized flex space.  On average my clients are getting rents in this range:

Basement units (no store front):  $1.50-$1.75/SF

Main floor with store front:  $1.75-$2.25/SF

Again, this is just an average of what I see and it does vary based on location, traffic flow, etc.

However, if you are buying the property, the lower the rents on the property, the better for you. The value and purchase price should be determined by the NOI over cap rate. Lower rents = better purchase price for you. Depending on where it is located, you may be able to remodel it and increase the rents.

If you are interested in going over the project with more depth, send me a private message and we can walk through some specifics.