How confident are people investing in Multi Tenant Industrial in this economy?

[Jon Sidoti]

Do people have confidence in the multi tenant industrial market today?

[Henry Clark]

We have had a project on the drawing board for about 5 years, just had other projects that outweighed it. Numbers worked but never made it to the top of the list. Have the permit in hand, the building erected quote, banker says no downpayment needed since it is tied to an existing project that is very LTV favorable. Our Midwest "B" market we are looking at $1 per month per sqft, we take care of the taxes and maintenance. They would do insurance. What type of market are you looking at? If you're in the Mass area, your market is priced crazy. Cost to build should not matter there.

Look at your deals.  Why the high cash in?  Would expect 25%.

[Derek Bell]

@Jon Sidoti I just had to table a project. I have full civil and architectural plans and the city has already given me a grading permit. Prices are high. Just like @Henry Clark , the numbers work but I think I am just going to move on to the next opportunity. It was for 2 buildings totaling 18k sf. Total of 5 tenants. It’s more of a retail flex other than flex industrial. Rents would be anywhere from $18-20/sf nnn. 

The city is making me extend a cul-de-sac before they will allow me to parcel the builds from the remaining acreage. So that is really killing my price. But essentially, it’s costing me almost $190/sf to build the buildings. My plan was to build 3 more after these 2, but think I am just going to sell off the 8 acres w the plans etc and let a bigger developer take it over. 

[Jon Sidoti]

@Henry Clark @Derek Bell Thanks for the response! What about buying already built, operating assets?  

[Derek Bell]

@Jon Sidoti.  Buying already built and operating? Absolutely. I’m in. But getting anything in my area that the big guys dont gobble up first is nearly impossible. That or pay a 6 cap for a 60 year old building with Billy Bob Hot Dogs as a tenant. The cost of everything is just really high right now. I am sure glad Bidenomics is working. 

[Henry Clark]

OP our market and experience will be different than in Mass.  Costs being the same your market rent is higher. 

[John McKee]

I have one of these units that I just purchased last year.  A few things that I have learned are as follows:

Make sure one of your units is occupied by a general contractor.  They will come in handy when you need something done to the property.  They can also assist newbie tenants with build out.

Always be advertising these units as they do have more frequent turnover than I realized.

Collect larger deposits.  The garage doors get beat up by the tenants when they run into them frequently.

Generally speaking they are good investments as you have more options with the kind of tenants you can get to fill these spaces. Ideally you want to make sure it's near a major highway so tenants have easy access points to their customer base, especially with the trade type tenants like plumbers, HVAC etc.   

[Derek Bell]

Also, make sure there is some kind of waste management agreement. Especially if the tenants are all nnn. The dumpster is ALWAYS an issue on site. One tenant will use it too much and the others will *****, blah blah. Another will fill it too high and then get hit will overage charges which the others have to pay. Etc etc.  And illegal dumping is an issue as well. I would say thats the biggest issue I have when it comes to these multi tenant commercial/industrial flex warehouses.