Understanding Industrial Real Estate

Industrial real estate can be one of the most valuable properties in the property market. What do we understand about industrial real estate? Read on for a quick run-through of what industrial property is all about!

What is industrial property?

Industrial Warehouse

Industrial properties are buildings and land used for industrial activities such as production, manufacturing, warehousing, distribution, research, assembly, light storage and data centres.

Production and transportation of goods and logistics have considerably developed since the start of the industrial revolution. Industrial property is a significant part of the real estate industry, as well as a huge contributor to our societal framework.

Types of industrial properties

Industrial Warehouse

There are several types of industrial properties that each serve different purposes:

  1. Warehouses/Fulfillment Centres

One of the types of industrial real estate is warehouses and fulfillment centres. As online shopping gradually becomes an integral part of the economy, e-commerce has brought forth a significant importance to logistics, serving the growing demands of the digital economy.

  1. Data centres

Data centres have quickly taken over the property industry with the growing need for cloud storage. Companies and investors use data centres to house computer systems for telecommunication and storage.

  1. Medical use laboratories

Since the pandemic, life sciences have become more important than ever in the healthcare industry. Industrial real estate has given rise to the transformation of industrial property into medical use laboratories for healthcare purposes.

  1. Food manufacturing facilities

Companies and investors have turned to industrial real estate to accommodate the need for storage and processing of food and beverages, especially for restaurants and grocery stores. The concept of a central kitchen has become a significant part of food businesses.

  1. Temperature-controlled facilities

Industrial real estate is also used as temperature-controlled facilities, serving as cold storage for food and beverages as well as temperature-controlled medicine and vaccines for distribution.

How does industrial real estate work?

Industrial real estate workers

The industrial property scene offers investors incredible potential. Having long-term tenants equals income stability, and a strategically-placed industrial property with easy access to sea ports and logistics can provide substantial returns.

However, to maximize profits through industrial property investment, finding good quality properties that are located in prime areas and ample developments in the surrounding environment can boost your chances. If the property doesn’t fulfill the following criteria, it can easily become a risky financial move.

Industrial real estate is used for many purposes. One of the common functions of industrial property is for assembly and production, using labour or automation and robotics for production. Other purposes of industrial property are for storage and distribution, in which case location plays a significant role in its operations. Some high-tech industrial properties require backup generators, ventilation and cooling systems, as well as tight security systems to maintain the safety of data and appliances.

Cities have designated areas for these industrial properties to be built and operated on so as to not disrupt housing and business areas.

Trends in industrial property development

Robotics and machinery in an industrial warehouse

Industrial real estate is seeing some positive development in the near future. The MIEA (Malaysian Institute of Estate Agents) sees trends in the industrial scene such as the innovative flexi-space concept, where retail, offices, warehouses and showrooms are combined to create a clean and sustainable space that caters to most business types.

Other developmental focuses in industrial real estate include stricter security and increased professional assistance and services to owners such as company incorporation, obtaining manufacturing licenses and business licenses and more.

Although it is a niche market, investing in industrial property can bring forth substantial returns. Understanding how each type of property works and what services they can provide can help you make an educated decision before investing.

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