Industrial commercial real estate used to be hard to access and mattered little in the grand scheme of the best real estate markets. But thanks to the e-commerce boom, it is now a key economic driver that needs to be understood by savvy investors in all real estate classes.
That’s why in today’s episode of the JWB Not Your Average Investor Show, we’re hosting a major player in the industrial commercial real estate market of Jacksonville, Christian Harden. In our discussion, he helped us understand:
- The need for savvy real estate investors to know all asset classes
- How industrial clusters affect residential real estate
- The new opportunities surfacing in the industrial commercial real estate landscape
Christian Harden allows our community to gain an edge in real estate knowledge. When you invest in real estate, you want to know various data points, including:
Where are the single-family homes located in relation to the industrial commercial real estate?
Is the metro area thriving with job growth, plenty of industrial properties and office space, solid population growth, and an affordable cost of living?
Are the real estate investors coming into the market planning to buy a home over the long term so they can meet or exceed the national averages for ROI?
How did the area fare during the COVID-19 pandemic, and what is the region showing as far as year over year growth?
When you factor in all of this data, you will feel more confident when investing in industrial commercial real estate in the best real estate markets around the nation, but especially Jacksonville, FL.
What is industrial commercial real estate?
If you look at the asset classes, there are residential and commercial. In commercial real estate, you have commercial offices, retail, and industrial. Industrial was a forgotten asset class for many years because it’s less visible than retail and offices. Industrial is tucked behind that, like distribution centers, storage, and manufacturing.
Over time, as the supply chain has improved and manufacturing has accelerated globally, consumers can get products quicker. The economy shows a rise in industrial properties because of the distribution warehouses. We also see auto repair shops thriving in these industrial buildings, which come in many shapes and sizes.
If industrial commercial real estate is located near residential neighborhoods, they usually provide jobs to the surrounding community. Christian Harden has been working in the industrial commercial real estate industry for two decades. He has seen many businesses operating out of industrial commercial real estate in Jacksonville, making everything from plastic bags to warehouses.
What is the supply and demand of this asset class?
Major companies have been stating there are not enough warehouses to contain all the goods being shipped now. What is the historical timeline getting us to here? During the 2008 – 2009 recession, every aspect of the economy was impacted. That is where e-commerce started taking off, getting products to consumers at a lower cost because they’re not only selling out of brick-and-mortar storefronts. Coming out of that recession, we saw a lot of technology helping distribution centers send products direct to consumers. Along I-95 or I-295 in Jacksonville, you can rent space in a warehouse for cheap, and if you’re moving products, this is a profitable way to house your business. Today, landlords can lease space for little overhead, and tenants are clamoring for space since industrial commercial real estate demand is so high and spaces are getting smaller.
If you own industrial commercial real estate in the best real estate markets, you will see a considerable ROI in your investment. You can own industrial commercial real estate throughout Florida and be profitable. Since many people are coming to Florida, we cannot build these properties fast enough to keep up with demand.
How did Christian Harden get into the Jacksonville real estate market?
His group is the Jacksonville division of NAI Hallmark, which is part of NAI Global. He is dealing with investors who want to get into this asset class. JWB uses Christian’s team to manage our Downtown Jacksonville projects if you are looking for commercial property management companies. All of our investors who own single-family properties around downtown will grow because of the positive returns from these industrial commercial real estate properties. It’s an excellent, collaborative effect that benefits everyone in Jacksonville.
The relationship is more important than the transaction, which mirrors the values of JWB. When buyers come into Jacksonville, they may not know the area too well. Christian and his team show industrial commercial real estate investors where the properties are in relation to where the people live and how the Jacksonville market is hot and continues to grow since they’re close to the ports and the influx of people migrating to Florida.
Who is the typical client of NAI Hallmark and industrial commercial real estate?
The demand continues to skyrocket. We attract stable industrial commercial real estate investors who hold onto their properties for a long time with positive cash flow.
Often, the tenants of these properties rent and want to buy these properties, so sometimes they become clients of NAI Hallmark. They might use portions of the property and lease out the remaining space for positive cash flow. These properties aren’t flashy, but they are regular moneymakers with a good ROI.
Industrial real estate is blowing up now in the best real estate markets, even with remote workers and online sales. We still need to build, store, and ship stuff for all those stay-at-home workers.
How is industrial commercial real estate similar to investing in single-family homes?
They both have positive cash flow. Both are great asset classes to invest in. They both have a practical, functional use. They both are in demand. The tenants pay for the taxes for both real estate investments. But they differ, too. For example, you have less emotional ties to commercial real estate than you would a house. Check here if you’d like to hear more about how JWB qualifies tenants to live in the single-family homes we rent. Read the blog: How To Find Good Tenants For Your Rental Property for further information.
What is the average down payment size for this type of commercial property?
You are expected to put at least 60% down for industrial commercial real estate. The average cost per square foot is currently $70 for 100,000 Square Feet, so that’s a $7M investment. If you can find a good deal, you will find a good ROI. Some businesses don’t use 100% of the building space, so you can approach the building owners and ask if they’re open to selling a portion of all of the building if you want to invest.
The acquisition of industrial commercial real estate is far more capital intensive than single-family rental properties. The property management for industrial warehouse space is less involved because you don’t have the same ongoing maintenance you would see with houses. So yes, these industrial commercial properties cost more, but they make more money, too. Per Christina, you can own 20 warehouses and make more money with less risk than if you owned 200 homes.
NAI Global does not get into residential rental property management as JWB does. It’s interesting to see the similarities and differences between the two companies and asset classes.
How did industrial commercial real estate hold up during COVID?
We were all nervous but found that this asset class remained stable throughout the pandemic. The cap rates have become more competitive, the demand is high, and the leases continue with these properties. In some ways, their cap rates for industrial real estate are better than single-family homes.
You can find land to build, but the build-outs are high because of all the infrastructure costs. The costs of all real estate are rising because industrial commercial real estate is high because they’re made of expensive metal and concrete versus the wood that houses are built out of.
How much rent can you collect from industrial commercial real estate?
The tenants typically see annual rent increases of 2% – 4%, which has advantages over residential properties at 8%. That is why tenants of industrial commercial properties stay for much longer, like multiple decades.
How easy or passive is it for investors of industrial commercial real estate?
On the rental property side, clients love JWB because we make it an easy passive process. Christian’s clients usually have a goal of growth in mind.
This asset class is more capital intensive, and you need to be familiar with the landscapes within the best real estate markets. So to begin, it is wise to know what you are getting into with this asset class. But yes, Christian and his team do their part to make the investment as easy as possible. But it is not going to be as easy as what JWB has done for its investors.
Where is retail and office real estate trending?
Christian is looking at Florida and the best real estate markets within the region. Retail is becoming more experiential, and it’s grown. It was surprising how fast it rebounded after COVID. After all, you can’t get your nails done online, nor your haircut. The demand for retail remains high.
In Jacksonville, we are seeing a lot of people return to the office spaces as well. Some people prefer to be in office space, and he predicts that the commercial office real estate will continue to grow as well, especially if you can take your dog to work. These office spaces need to be places where people want to be versus their own homes.
As we see things evolve, more commercial buildings will include attractive spaces that are good for creative content producers. Because of Instagram, Tik Tok, YouTube, and other platforms, people want to take photos and videos in nice-looking spaces and all the amenities that go along with these spaces, like restaurants, outdoor spaces, and mixed-use areas.
Many big employers are learning that if they don’t provide attractive office spaces with equally beautiful amenities, they won’t remain competitive in attracting top talent. The willingness to make your commercial real estate a desirable place will help with your investment’s bottom line.
How Do I Find Out More About Investing In Turnkey Rentals With JWB?
Contact the JWB team to begin the discussion. If you want to invest in Jacksonville real estate, now is a great time to jump in. Go to www.ChatWithJWB.com and find out how we can help you reach your financial goals through turnkey single-family rental homes.
If you want to become part of the JWB online community, join us in the JWB Facebook Group at https://www.facebook.com/CashFlowProperties.
You can also go to www.JWBInventory.com to see what properties are currently available. We encourage you to contact the JWB team for a consultation to determine how our turnkey rental properties can deliver positive passive cash flow.
We invite you to watch this episode of the Not Your Average Investor Show in its entirety because Christian Harden shared some high-level concepts about the best real estate markets for industrial commercial real estate. Fortunately, Jacksonville real estate continues to be an excellent return for real estate investors.
To Your Success,
Gregg Cohen
