Chad Griffiths

Simple Checklist for Successful Industrial Real Estate Investing

Investing in industrial real estate is easy. You just need to: • Find a building that tenants actually want (not just today but through different market cycles) • Make sure it works for multiple tenant types and not just one very specific use case • Understand the micro location, surrounding uses, access to major routes, traffic flow and site circulation • Confirm zoning allows current and future uses, including any restrictions, overlays or non conforming risks • Evaluate site layout including yard space, trailer parking, turning radii and site coverage efficiency • Assess building functionality like clear height, column spacing, bay sizes and overall layout efficiency • Analyze loading configuration including dock vs grade, door counts and how it actually functions operationally • Verify power capacity, distribution, and whether it can support different tenant requirements • Review office buildout ratio and whether it aligns with typical demand for that size range • Understand construction type, age and how that impacts maintenance and tenant appeal • Identify any functional obsolescence that could limit future leasing • Benchmark all of it against competing buildings in the market (not just in theory but in active listings) Then run a quick proforma: • In place rents vs market rents vs achievable rents • Lease rollover schedule and downtime assumptions • Tenant improvement allowances and leasing commissions on renewals and new deals • Free rent, inducements and absorption timing • Vacancy assumptions by suite size and tenant profile, not just a flat rate • Operating costs broken down by fixed vs variable and recoverability • Property tax reassessment risk post acquisition • Insurance, utilities, repairs and maintenance with inflation assumptions • Capital expenditures including near term vs long term and reserve planning • Deferred maintenance you didn’t see on day one • Debt terms, interest rate assumptions and sensitivity to rate changes • Loan covenants, DSCR thresholds and refinancing risk • Exit cap rate, disposition costs and timing • Sensitivity analysis on rents, vacancy, cap rates and interest rates • Scenario modeling for best case, base case and what just went wrong case Simple. After that, you and your lawyer review: • Purchase agreement including reps, warranties, conditions, timelines and outs • Title search for encumbrances, easements, rights of way (and any restrictions on use) • Survey to confirm boundaries, access points, encroachments, and site functionality • Existing leases including rent rolls, expiry profiles, renewal options, and assignment clauses • Tenant inducements, side letters, and any off book agreements • Estoppel certificates and tenant confirmations • Service contracts, vendor agreements and termination rights • Zoning compliance and any legal non conforming use risks • Environmental liabilities, both known and potential • Historical issues tied to prior ownership or use of the property • Financing terms, lender requirements and personal or corporate guarantees • Structuring considerations for ownership, tax implications and liability exposure No big deal. Then order a few routine reports: • ESA to confirm the soil isn’t a future science experiment • PCR to make sure the building isn’t quietly falling apart • Appraisal so the lender agrees with your optimism And while you’re at it: • Validate that the rent you’re underwriting is actually achievable • Confirm there’s real tenant demand, not just theoretical demand • Make sure the building still works if your current tenant leaves • Stress test everything in case the market shifts • Figure out who is doing property management. What about asset management? • Don't forget insurance too, which might be a bit more complex than a single family home. Oh and it's not difficult competing with significantly more experienced investors, some of whom have entire teams devoted to sourcing and analyzing deals. But if you just ignore all the asymmetries of information and the considerably high risks maybe they just go away? Anywho, once you get through these details it's really easy peasy.