Industrial real estate has been the talk of town here in Dallas-Fort Worth and around the nation. Newly built high-cube distribution facilities are a popular trend in the industrial space, but I’ve found that mid-sized, second-generation properties are a long-term investment that never go out of style.
While many attribute the recent success of industrial real estate to online retailers like Amazon, additional businesses including automotive and electronics, construction and design, food, entertainment and lifestyle, healthcare, and other types of companies are also driving demand. These users prefer infill locations versus new construction because they need to be close to business centers.
When many people think of tenants who lease second-generation industrial facilities, they picture something akin to Dunder Mifflin, the fictional paper sales company featured in “The Office”—boring businesses that don’t move the needle in any way. In our experience, though, companies leasing mid-size modern industrial properties are anything but ordinary.
Tenants of second-generation industrial infill facilities can include:
Automotive and Electronic: Automotive parts manufacturers, corporate and fleet car services, display systems manufacturing, emergency vehicle supply and service, computer systems manufacturers, telecommunications service, and electronic parts manufacturers.
Construction and design: Custom cabinetry, contractor suppliers, office and home furniture rental and supply, outdoor playground equipment, tools, electrical, and plumbing suppliers, landscaping, home furnishings (granite, carpets, tile flooring, blinds, etc.), and companies that offer complete home remodeling.
Food: Bakery ingredient supply, beverage distributors, cold storage, and logistics for perishable foods, indoor farms, manufacturers of non-perishable foods, and specialty food supply.
Entertainment and lifestyle: Convention and tradeshow rentals, gaming equipment manufacturing and supply, fitness clubs, indoor sports training facilities, party rental and supplies, and trampoline parks.
Healthcare: Medical labs, pharmaceutical supply, manufacturers of specialized medical equipment, and even outpatient clinics and rehab facilities.
Other: Bulk mail distribution, light manufacturing and assembly, and light machinery distributers.
These are businesses that matter. They are innovators, small businesses, non-profit organizations and creators that have an impact on your daily life. Look around, they might have had a hand in how your house was constructed, making your car run properly, the medicine that you took this morning, or what you’re eating for lunch.
You might wonder what makes second-generation infill industrial properties so attractive to these businesses. We’ve found that with the proper upgrades and modernization, these properties are attractive to tenants due to their size, versatility, and location. Additionally, the infill industrial locations they need not only reduce transportation overhead, but also provide greater access to labor.
Our strategy includes making capital improvements as soon as acquisitions are closed. This typically involves providing better car parking opportunities, LED lighting in warehouses, modern fire suppression systems, roof repairs and replacements, upgraded truck loading docks, and truck courts. To create external signals that projects have been revitalized, we look for opportunities for signage improvements, as well as exterior and interior painting, and lighting upgrades.
We have been identifying and acquiring value-add infill properties in North Texas for more than 25 years. We know the history of the industrial real estate market and believe that its future outlook is strong.
While e-commerce has certainly played a role in the current industrial market, it is hardly the backbone of this commercial real estate sector. That is why Westmount is actively seeking to acquire value-add industrial real estate assets in the DFW market and beyond. The industrial real estate market is strong and we believe that it won’t be slowing down anytime soon.
Cliff Booth is president and CEO of Westmount Realty Capital.