The demand for industrial real estate is soaring high in Austin. Keeping pace with it is a steady supply of highly speculative projects. Additionally, millions of square feet of industrial and flex spaces are in the pipeline. If you are considering investing in Austin’s industrial real estate, it assures promising returns.
And unlike other asset classes, industrial real estate is less prone to risks due to lower vacancy rates, high rental yields, long-term lease periods, and increased appreciation. However, industrial real estate investments can be tricky. Therefore, working with a real estate agent in Austin can be an ideal option.
They have in-depth experience in industrial real estate and can help you mitigate the risks by taking a strategic approach.Let’s understand how you can mitigate your risks involving industrial real estate investment in Austin.
1. Understand the market and your submarket
Industrial real estate investments can be substantial. Therefore, it is important to analyze the market thoroughly before you proceed. Understanding the market involves evaluating the demand-supply, future trends and scope for development, probable appreciation, interest rates, inflation, unemployment, etc.
At the same time, it is important to understand why the demand for industrial real estate is increasing in Austin. One of the primary reasons behind this is Austin’s collaborative market. Large-scale companies like Samsung, Amazon, and Tesla, combined with the growing eCommerce market, are driving major suppliers to consume warehouse spaces and manufacturing units.
Additionally, the city is also offering lucrative incentives for industrial development, such as the Chapter 313 tax breaks. Industrial rental rates are growing steadily, driving more investments across most types of properties, including manufacturing, nuclear energy, R&D, computer data centers, renewable energy, and clean energy.
2. Perform due diligence
When you hire real estate brokerage services in Austin, you can be assured of complete due diligence that can help mitigate the risks. This includes:
- Location of the property
- Is the industrial property correctly zoned for the type of industrial property you plan to invest in?
- Physical characteristics keeping in mind the key properties of an industrial property
- Ease of accessibility and proximity to major transportation facilities like airways, rail, ports, highways, etc.
- Utilities available at the industrial site, including water, electricity, telephone, internet service, natural gas, etc.
- Applicable ordinances, entitlements, restrictions, etc.
- Title commitments
3. Asset Diversification
Although industrial real estate involves substantial investments, diversification can be a good way to reduce your risks. Consider putting your money across different asset classes like warehousing, flex spaces, and distribution centers. This enables you to spread the risk as well as optimize your overall returns.
4. Have an exit strategy in mind
One of the best ways to mitigate your risks is to buy an industrial property with different exit strategies in mind. This enables you to exit the market if you face an extended period of no/limited cash. A real estate brokerage firm can help you determine the right exit strategy – wholesale, fix and flip, buy and hold, or sell and do a 1031 tax-deferred exchange.
To meet your real estate investment goals and secure your financial future, it is important to assess the market thoroughly and measure your risks. A real estate agent in Austin can help identify potential investment risks and take strategic measures to mitigate the same.