Differences between multifamily & industrial real estate

4 Major Differences Between Multifamily and Industrial Real Estate

Are you debating whether to invest in multifamily or industrial real estate? Investing and developing any kind of real estate asset can seem complicated. How much time can you dedicate? How involved do you want to be? I’m here to tell you that in 2022, industrial real estate is the better long term investment. Here’s 4 reasons why:

1. Operations: Multifamily is management intensive and requires a lot of operations, personnel and overhead. Industrial real estate can be better automated and requires a lot less day to day management. You can outsource almost all “tasks” in industrial real estate.
2. Tenants: In an average multifamily property you will have around 60 tenants to manage. This includes leases, collecting rent, handling maintenance requests and other day to day management. In industrial assets, you will will have less tenants for more square footage, meaning, the same size asset that has 60 tenants in multifamily, will have 2-5 tenants in industrial. That is a lot less tenant management and turnover.
3. Maintenance and Add ons: In multifamily assets, the owner is responsible for all maintenance requests, upgrades and build outs. Owners often change all kitchen appliances every few years. They also replace carpets, fix roofs, maintain concrete and other major and expensive items in the community. Industrial tenants are responsible for all maintenance, add ons and build outs that they want in their office warehouse spaces. The product is more “custom”, where tenants receive an empty warehouse space that they can customize and build out to their needs. The only maintenance that an owner is responsible for is the common grounds and basic utility items.
4. Lease: Multifamily tenants’ leases are 1 year long with some shorter. Many tenants renew annually but the turnover is still quite high in comparison. Industrial leases are a lot longer (average 3 years), meaning once you’ve signed a tenant on, you have that tenant for at least 3 years and oftentimes a lot longer. Your management costs as well as customer acquisition costs are a lot less in comparison.

In conclusion, in today’s market, an investor has many residential and commercial real estate investments to choose from. Commercial, or more specifically, industrial assets, are the right choice for investors and developers who want the benefits and payback without the intensive management aspect.

https://www.bizjournals.com/houston/news/2019/05/03/with-60m-investment-coming-this-multifamily.html

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