Industrial Real Estate Investment Trusts or REITs are real estate companies that own and manage the production, storage, and distribution of real estate assets. According to law, industrial REITs are required to pay their investors and shareholders a minimum of 90% of the net revenue in the form of dividends.
Anyone can invest in industrial REITs. All they have to do is purchase shares of the company they are interested in in the public exchange market. Industrial REITs are an attractive investment since they provide individuals the opportunity to own real estate assets without necessarily having to purchase industrial buildings. Investors become liable to receive handsome returns and appreciation on their capital injections.
How Do Industrial REITs Work?
Industrial REITs are involved in owning and managing various operational arms of industrial properties such as factories, warehouses, e-commerce-related companies, and distribution centers.
- Businesses in the real estate industry require large amounts of physical space to set up warehouses, loading tracks, and house heavy machinery. Hence, they are always placed outside the city district.
Industrial properties of all kinds, on the other hand, exist together as a cluster in the space allotted to them. Manufacturing companies and warehouses may operate from the industrial buildings they own.
- The process of building or acquiring industrial properties is hectic and expensive because it requires a lot of capital investment. What’s more, for the efforts to be fruitful, they must also possess a significant amount of knowledge on the industry.
However, just like other types of REITs, anyone can invest in real estate without actually buying or developing a property on their own. This makes it convenient for anyone who is interested in the real estate industry.
- Contributions from investors are used to acquire land or buy industrial properties on which they may develop industrial buildings. In return, investors earn yearly dividends on their investments. REITs may also be used to diversify an investor’s portfolio because one may invest in a variety of asset classes, such as equity, fixed income and cash.
Growth of Industrial REITs
Industrial REITs have grown significantly over the last ten years. The majority of consumers prefer to shop from the comfort of their homes. This has led to e-commerce businesses growing substantially.
Major e-commerce companies have been setting up warehouses and fulfillment centers around their customers base these days. This translates to high demand for storage and logistics since the demands of customers have been increasing too. Thus, people who invest in industrial REITs stand a good chance to benefit from it.
Industrial REITs’ underlying assets are warehouses and fulfillment facilities, putting them at the epicenter of their growth. Industrial REITs that invest in strategically positioned warehouses with convenient access to public transportation reap significant benefits. They are able to facilitate the transfer of goods for manufacturers, distributors, and fulfillment organizations to customers around the world.
Tenants set up warehouses close to metropolitan cities to speed up order logistics and delivery when they receive an order from a customer. Investing in industrial parks near urban regions can assist in alleviating the present shortage of warehouse space in the market.
Top 2 Benefits of Industrial REITs
1. Very Adaptable
Industrial REITs change according to market conditions. Unlike commercial REITs, which build units according to the wishes of each tenant, industrial REITs are created in a way that allows them to adapt to various applications.
When inventory builds up and the firm is forced to slow down on new product development, the floor area may simply be changed into a storage facility or a truck loading section, depending on the needs of the company.
2. Less Capital Expenditure
Industrial REITs are also favored since they just demand a little initial investment compared to other types of REITs. Industrial buildings require a lot of open floor space to set up machinery for industrial processes, so there isn’t much in the way of an aesthetic makeover.
Industrial REITs are located outside of core business districts in places that are conveniently accessible to delivery trucks and are close to major metropolitan centers with a big population.
Industrial REITs are a perfect type of investment since anyone can invest in them. Since the e-commerce industry is booming, industrial REITs are one of the best REITs to invest in.