Recent events have even further strengthen the argument for trading out of multifamily properties and into commercial real estate industrial e-commerce warehouse properties.
Originally posted February 3rd, but things have changed considerably since with the global coronavirus COVID-19 pandemic and social unrest! With the desire to socially distance and find open spaces one must wonder if people will be motivated to avoid the dense urban centers and move to the more spread-out area of the suburbs. This would be a bit of a countertrend to previous years with the TODs (Transit Oriented Developments) and mixed-use developments in city centers.
On the other hand, the desire to avoid crowds and packed retail buildings, more folks are using ecommerce. This will only increase the already overwhelming demand for warehouse space, especially in the areas close to the population base where faster delivery is possible.
These changes have only led to a stronger argument for this trade idea!
This trade seems to make more and more sense for the commercial real estate investor of late. Multifamily appears to have peaked after an extended run and is experiencing downward pressure over concerns with governmental/legislative issues, especially regionally here regionally in Southern California. Meanwhile, Industrial is starting to take over as the hottest commercial real estate segment. Also, some apartment owners no longer have the tolerance to deal with the higher demands and maintenance needs multifamily typically requires or they have moved out of the area.
The solution? Sell your Multifamily Assets and Trade into Industrial Real Estate Properties. Why Industrial? Ecommerce and its explosive need for space. With all the big box retail giants like Sears and Toys R Us shutting down, ecommerce has disrupted the industry transferring the need for space from store to warehouse.
In 2017 e-commerce accounted for 9% of all retail sales in the United States and is expected to grow to 12.4% this year! Based on those numbers e-commerce appears to still have a lot of room to run.
It’s also normally considered an easier asset to manage with less demands.
So, what’s the first step if you’re interested? Get an idea of what your Apartment Building is worth, so you have an idea of your budget. Next get a list of available properties to trade into. This can include leased properties with stabilized returns, upside potential or vacant properties with proforma projections. A good broker should be able to help you with this, feel free to reach out if you do not know where to start.