Class B Industrial Real Estate

[Geoff Stuhr]

Just wanted to share my perspective as to why we are focusing our efforts on Class B Industrial Real Estate. For those that don't know, class B properties are generally older and have some degree of wear and tear, but they are still well-maintained and functional. Industrial properties, meaning buildings that are designed for manufacturing, storage, or distribution purposes - which includes warehouses, factories, and industrial parks, are phenomenal value-add plays. Our experience was generally in B/C class multifamily, and we have taken that value add strategy into the Industrial asset class because of the following key reasons:

1. -Lower Acquisition Costs: Class B industrial properties are typically less expensive than Class A properties, which are newer, high-end buildings with the latest technology and amenities. This lower acquisition cost can make it easier to get started with real estate investing and can also provide a higher potential return on investment.
2. -Stable Cash Flow: Industrial properties tend to have longer lease terms than other types of properties, which can provide more stability in terms of cash flow. Class B industrial properties also tend to have lower vacancy rates than Class C properties, which can help ensure a steady stream of rental income.
3. -Diverse Tenant Base: Industrial properties tend to attract a diverse tenant base, including manufacturing companies, logistics and distribution firms, and e-commerce businesses. This diversity can help protect against fluctuations in any one industry and can provide more stability in terms of tenant occupancy.
4. -Strong Demand: With the rise of e-commerce and the increasing importance of logistics and supply chain management, there is a strong demand for industrial properties in the United States. This demand is likely to continue in the coming years, which can provide a steady stream of potential tenants and rental income.
5. -Value-Add Opportunities: this is perhaps our favorite reason for looking for Class B Industrial deals, because Class B industrial properties are older and may have some wear and tear, there are often opportunities for value-add investments. This can include renovations, upgrades, or repositioning the property to attract higher-quality tenants and increase rental income.

The risks associated with Class B industrial properties are generally tied to the broader economy, changes in tenant demand, and unexpected maintenance or repair costs, but we feel that if we conduct thorough due diligence and carefully evaluate potential opportunities, investing in Class B industrial real estate offers a range of advantages and opportunities.