Industrial real estate is property used to produce, store or move physical goods. It is one of the main commercial property types, alongside office, retail and multifamily. Buildings range from small workshops to huge distribution centers next to highways, ports and rail lines.
For investors, industrial property often means long leases with businesses rather than households, simple building designs and leases where the tenant pays most operating costs.
Main types
- Warehouse and distribution: large open buildings for storing goods and moving them on to stores or customers.
- Fulfillment centers: distribution buildings set up for picking and shipping individual orders, often with many loading doors.
- Manufacturing: buildings for making products, sometimes with heavy power, cranes or special floors.
- Flex space: a mix of office and light industrial space in one building.
- Cold storage: refrigerated or frozen warehouses for food and medicine.
- Outdoor storage and truck yards: land used to park trucks, trailers or equipment.
Features tenants care about
- Clear height inside the building
- Loading: the number of dock high doors and drive in doors
- Truck court depth, so trucks can turn and back in
- Power capacity for equipment
- Location near highways, workers and customers
- Office share, usually a small part of the total space
How industrial leases work
Most industrial leases are net leases. Under a triple net lease, the tenant pays base rent plus its share of property taxes, insurance and maintenance. Rent is usually quoted per square foot per year, and terms of three to ten years or more are common, with fixed yearly increases. The landlord may fund tenant improvements such as office build outs.
Example
A hypothetical 40,000 square foot warehouse is leased at $9 per square foot per year on a triple net basis. Base rent is $360,000 a year. Because the tenant pays taxes, insurance and maintenance, the owner’s own costs are mainly a management fee and reserves of about $20,000 a year, giving net operating income of about $340,000. At a 6.5% cap rate, that suggests a value near $5.2 million.
Why it matters for investors
Industrial property can offer steady income with fewer tenants to manage than apartments, but each tenant matters more. One move out can empty a whole building, and specialized buildings can take longer to re-lease. Investors look closely at tenant credit, lease length, how easily the building could be used by someone else, and local supply. TenantLoop’s commercial tools handle commercial leases with recurring charges by square footage, CAM charges and per property reporting in the same account as any residential units.
Related terms
In practice. How the term shows up day to day.
What is flex space?
A building that mixes office space with warehouse or light industrial space, often with a few loading doors. It suits small businesses that need both a front office and room to store or assemble goods.
What lease type is most common for industrial property?
Net leases, especially triple net, where the tenant pays its share of taxes, insurance and maintenance on top of base rent. Small multi-tenant buildings sometimes use modified gross leases.
What is clear height?
The usable height inside a warehouse, from the floor to the lowest obstruction overhead, such as beams or sprinklers. More clear height means more room to stack goods.