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Chapter 22 Industrial Property, Office Building and Shopping Center Analysis Investing in Industrial Buildings Industrial buildings have the advantages of reliable, credit-worthy tenants, long-term leases, and opportunities to shift many operating expenses to tenants

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chapter 22
Chapter 22

Industrial Property, Office Building and Shopping Center Analysis

investing in industrial buildings
Investing in Industrial Buildings
  • Industrial buildings have the advantages of reliable, credit-worthy tenants, long-term leases, and opportunities to shift many operating expenses to tenants
  • Business operators, short on capital, prefer to channel resources into business expansion rather than real estate ownership
demand for industrial space
Demand for Industrial Space
  • Largely a function of demand for products produced by industrial sector
  • Periodic shifts in demand for industrial space of various types and in different locations reflect alterations in composition of the industrial sector
    • Growth in service and technology
    • Decrease for products of heavy industry
locations factors
Locations Factors
  • Near fuel or power supply
  • Near markets
  • Footlose Industries
types of industrial buildings
Types of Industrial Buildings
  • No official classification system for industrial buildings. Can be characterized by nature of building’s construction or type of tenant it attracts:
    • Heavy industrial buildings
    • Loft buildings
    • Modern one-story structures
    • Incubator Buildings
investing in office buildings
Investing in Office Buildings
  • Dramatic growth in service sector has increased demand
  • Demand for office space is a derived demand –related to demand for services supplied by occupants of office buildings
  • Unlike owner-owned office buildings, investor-owned buildings tend to be more functional and less luxurious
  • Multi-year leases
  • Options to renew on occupied space
investing in shopping centers
Investing in Shopping Centers
  • Investors and developers have long provided favorable lease terms to anchor tenants—major stores that attract customers
  • Recently, developers have allowed major tenants to construct their own buildings on sites leased from owners
lease arrangement in shopping centers
Lease Arrangement in Shopping Centers
  • Owners set base rental rate and increase rental rates as tenant’s sales volume increases (percentage clause)
  • Large shopping center tenants typically lease space on net basis, paying all expenses associated with operation of their space; smaller tenants often pay own utility expenses
  • Shopping center tenants often pay common area maintenance fee
types of shopping centers
Types of Shopping Centers
  • Neighborhood shopping centers
  • Community shopping centers
  • Regional shopping malls
  • Super regional shopping malls
  • Lifestyle centers