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Industrial real estate has long been overlooked by traditional investors focused on single-family homes, multifamily units, or commercial retail properties. But for seasoned investor Chad Griffiths, it has proven to be a resilient, scalable, and profitable niche that offers a unique set of advantages.
Whether you're looking to diversify your portfolio or you're simply searching for new ways to generate motivated seller leads, exploring the world of industrial properties could unlock long-term growth opportunities.
What Is Industrial Real Estate?
Industrial real estate generally falls into three primary categories:
- Warehousing: These are large distribution centers, often used by companies like Amazon and FedEx. They store, repack, or redistribute goods. High ceiling heights and ample loading areas are key features.
- Manufacturing: Ranges from small auto mechanic shops to massive facilities like Boeing's airplane factories. These buildings bring in raw materials and produce finished goods on-site.
- Flex Industrial: This broad category includes properties zoned for industrial use but not strictly used for warehousing or manufacturing. Think cabinet stores, hot tub outlets, or even art galleries operating in industrial-zoned spaces.
Why Flex Industrial Exists — And Why It Matters
Flex industrial spaces often result from limitations in building design — like low ceilings or lack of loading docks — making them less attractive for traditional industrial tenants. But they can fetch higher rental rates from office or retail-style tenants who value the space for its versatility. This adaptability can turn a design limitation into a revenue advantage.
What Makes Industrial Real Estate Unique?
When evaluating industrial properties, ceiling height is becoming as important — if not more — than square footage. While square footage still dictates rent, ceiling height increases usable volume. A warehouse with 40-foot ceilings is far more valuable than one with 18-foot ceilings, assuming the same footprint.
Similarly, column spacing, loading dock design, power supply, yard space, and sprinkler systems all affect a building's desirability. One design flaw — like tight column spacing or poor truck access — could lead to longer vacancies or lower rents.
How Column Spacing Impacts Operations
Column spacing isn’t just a structural concern — it has direct operational consequences. For companies that rely on forklifts, racking systems, or conveyor belts, poor column placement can severely restrict movement and storage efficiency. This makes buildings with wide column grids or clear-span structures significantly more attractive to tenants.
How to Evaluate Industrial Investment Opportunities
Chad’s approach is simple but deeply strategic. He always evaluates a property as if it were vacant, regardless of existing tenants or lease terms. His rationale? Tenants eventually leave — whether due to bankruptcy, relocation, or business model changes.
Here's his mental checklist:
- Ceiling height vs. market norms
- Number and type of loading doors (grade vs. dock)
- Maneuverability for trucks
- Additional yard or parking space
- Power capabilities
- Fire safety systems (sprinklers, makeup air)
- Existing office space
- Area desirability
This risk-mitigation-first approach ensures that if a tenant leaves, the building still holds competitive value in the market.
The Insurance Clause Most Investors Overlook
Chad shared a cautionary tale of a landlord whose building sat vacant for over a year. Beyond the lost rent, he faced a lesser-known burden: an insurance clause requiring a walk-through inspection every two days to check for vandalism or damage. This meant an hour-and-a-half round trip every 48 hours — a costly and time-consuming obligation that’s easy to overlook during due diligence.
How Industrial Real Estate is Valued
Unlike residential properties, industrial values are not driven by comparable sales alone. Instead, value is a direct function of rental income.
In essence: Rent x Cap Rate = Value
For example, if your property could rent for $10/sqft and the going market cap rate is 6%, you can easily back-calculate its value. Chad emphasizes understanding local rent comps, adjusting for features like yard size or power supply, and estimating a conservative but realistic rent.
Pro Forma Planning and Market Research
Once downside risk is evaluated, Chad builds out a pro forma to model cash flow. This includes rental income, vacancy allowances, maintenance reserves, and financing assumptions. But he cautions that financial modeling only comes after you’re confident in the property’s physical fundamentals and local market dynamics.
Why Chad Chose Industrial Real Estate
Interestingly, Chad didn’t set out to become an industrial real estate investor. He began in residential, then transitioned to commercial brokerage in 2005. His entry into industrial was accidental — the firm he joined happened to focus heavily on it. But over time, he realized its benefits: steady demand, long-term tenants, and fewer tenant management headaches.
Industrial vs. Office — The Post-Pandemic Fallout
While industrial real estate has remained strong, office properties continue to struggle in a post-COVID world. With many employees preferring remote work, large office spaces face declining demand. Companies locked into 5–10 year leases are only now starting to adjust — potentially leading to more vacancies and downsizing in the near future.
In contrast, industrial properties — especially those tailored to e-commerce logistics or specialized manufacturing — have seen stable or increasing demand.
Trade-Offs in Remote Work and Office Downsizing
Chad emphasized that remote work has fundamentally shifted how employees view office spaces. With long commutes, poor lighting, and lackluster environments, many now prefer working from home. This creates challenges for office leasing and tenant retention. Conversely, companies must consider the trade-offs of reduced face time and relationship-building when downsizing space.
The Emotional Edge — Healthy Fear Prevents Costly Mistakes
Chad suggests that industrial real estate should feel “a little scary.” That fear pushes investors to do thorough due diligence and avoid rushed decisions. Overconfidence, especially among residential or multifamily investors, can lead to million-dollar mistakes in this more complex space.
Biggest Mistakes New Investors Make
According to Chad, one of the gravest errors new investors make is rushing in without understanding the complexities of industrial properties. One wrong assumption — like overestimating rent or overlooking ceiling height — can lead to catastrophic losses.
He shares an example of an investor who bought an industrial building 15 minutes outside the city. The tenant left early, and the owner has been sitting on a vacant property for over a year, even while paying all maintenance, taxes, and insurance — plus driving 45 minutes every two days to inspect the building, per insurance requirements.
The moral? Take your time. Chad himself waited nine years before buying his first industrial property.
Understand Your Market — Not Just the Asset
Chad attributes much of his success to deep market familiarity. He only invests within 10 minutes of his home base, allowing him to monitor lease rates, track vacancies, and know the players. New investors must commit to understanding their chosen market through broker reports, networking, site visits, and constant data gathering.
Scaling With Less Stress
One of the most attractive aspects of industrial real estate is its scalability. A $3M investment in single-family homes might yield 10-15 tenants. That’s 10-15 toilets, tenant calls, and turnover issues.
But that same $3M in industrial might house one Fortune 1000 tenant who handles all maintenance. No clogged toilet calls. No midnight emergencies. And most importantly — longer lease terms, often with built-in rent escalations.
Real Example — $3.1M Property with a Fortune 1000 Tenant
Chad shared an example of one such property: a 15,000 sq. ft. industrial building leased to a Fortune 1000 company. The purchase price was $3.1M, and the tenant manages everything internally — no landlord involvement in maintenance or day-to-day operations. This kind of setup highlights the strength and stability of scaling through industrial real estate.
Tenant Dynamics and Lease Negotiation
Yes, corporate tenants often negotiate hard at renewal. But landlords have leverage too. For instance, a tenant who’s invested millions in infrastructure isn’t likely to walk away easily. Plus, with strong market demand and low industrial vacancy rates, landlords can afford to hold firm.
Most leases require 6–12 months’ notice before a tenant’s option to renew, giving landlords time to prepare or market the space if needed.
Residential Tenant Law vs. Industrial Lease Law
Unlike residential leases, which often favor tenants, industrial leases fall under contract law — giving landlords more control. Evicting a non-paying residential tenant in winter is legally difficult, especially in snow-prone areas. But in commercial and industrial, terms are governed by the lease contract itself, allowing for firmer enforcement and fewer legal delays.
Structuring Leases for Long-Term Success
Chad advocates structuring leases with investor protections in mind. This includes triple-net (NNN) leases, where tenants cover taxes, insurance, and maintenance; scheduled rent escalations; and strong default clauses. These terms can reduce investor risk and maximize cash flow predictability.
Final Thoughts: Proceed With Caution — But Confidence
Industrial real estate isn’t for the impatient. But with the right knowledge and market understanding, it offers tremendous upside. Between minimal tenant churn, strong lease structures, scalable portfolios, and fewer management hassles, it’s a space more investors should seriously consider.
Just be prepared to study, learn your market, and enter with humility. A cautious approach could save you hundreds of thousands — and reward you with millions.
Key Takeaways
Industrial real estate offers strong scalability and fewer management headaches
With long-term corporate tenants and triple-net leases, investors can grow portfolios with minimal day-to-day involvement.
There are three main types of industrial properties
Warehousing, manufacturing, and flex industrial — each with unique tenant types and design considerations.
Ceiling height and column spacing are critical evaluation metrics
Beyond square footage, the functionality and flexibility of a space depend heavily on cubic footage and column layout.
Always evaluate a property as if it were vacant
Even if a long-term tenant is in place, Chad emphasizes preparing for turnover and ensuring the asset is desirable in an open market.
Flex spaces offer higher rent potential but are driven by design constraints
While not suitable for heavy warehousing, flex properties can attract higher-paying office or retail-style users.
Industrial property value is driven by rental income
Unlike residential, valuation follows a straightforward formula: Rent x Cap Rate = Value. Market rents are the key driver.
Thorough market knowledge is essential before investing
Investors must understand ceiling norms, rent comps, and vacancy rates in their specific market — often requiring months of research.
Rushing into industrial real estate can lead to massive losses
Mistakes like misjudging ceiling height or tenant risk can result in year-long vacancies and hundreds of thousands in lost income.
Leases favor landlords more than in residential
Commercial leases operate under contract law, giving landlords greater protection and eviction flexibility than residential leases.
Office real estate continues to struggle post-pandemic
Industrial is proving more resilient than office spaces, which are facing long-term downsizing due to remote work trends.
Healthy fear and due diligence are necessary for success
Industrial real estate is complex — and should feel a little intimidating. That discomfort drives better decisions.
Well-structured leases (e.g., NNN, escalations) reduce risk
Setting terms that pass costs to tenants and build in predictable income is key for long-term success.
Investors benefit from fewer tenants and less turnover
For the same capital, industrial provides more stability and less churn compared to multifamily or single-family investments.
Real-world examples highlight the upside and the risk
From a $3.1M property leased to a Fortune 1000 company to an investor stuck with a vacant building, stories ground the strategy.
Build Your Real Estate Business with Strategic Investments
If you’re ready to grow your portfolio beyond houses or multifamily units, it may be time to look into industrial real estate. Take the time to learn, avoid costly mistakes, and build a portfolio that attracts long-term tenants and stable cash flow.
Start exploring today — and secure your next wave of motivated seller leads by positioning yourself where the real opportunity lies.
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