40 percent of all industrial space in the U.S. is multi-tenant space. More than 60 percent of new industrial leases in 2018 involved spaces smaller than 15,000 square feet. Here’s why:
• Businesses can range from plumbers and electricians, to auto technicians, to research and development companies.
• Omnichannel retailers are bowing to the needs of “want-it-now” consumers,requiring smaller fulfillment centers to focus on faster delivery services. Retailers are trading storefronts for light industrial space, as they transition from bricks-and-mortar to e-commerce.
One huge advantage of a multi-tenant industrial property is it can be hands-off. Leases for such a facility can range from net (in which the tenant pays at least a portion of the property costs, in addition to monthly rent) to triple net (in which the tenant pays 100 percent of the costs, including taxes, maintenance and improvements). A lot less could be coming out of the investor’s pocket for upkeep and maintenance.
Another reason is the potential low cost to invest. Compared against other property types such as multifamily, retail, and office, industrial transaction prices per square foot remain the lowest. As of the third quarter of 2018, industrial property prices hovered around $100 per square foot on average, compared to the average for all property types of $219. This relatively low price could provide the opportunity for an attractive buy-in.
It’s true multi-tenant industrial properties could provide an attractive risk-adjusted return for little out-of-pocket costs. Making this asset class work requires in-depth research to ensure generation of enough income to meet your financial goals.
Insuring your client’s Light Industrial Park investment
Check out some highlights from Novita Insurance Solutions’s package for this rapidly growing asset class:
• Replacement Cost
• Inflation Guard
Business Personal Property
• Replacement Cost
• Loss of Income
• Business Income & Extra Expense
• Bodily Injury and Property Damage
• Personal and Advertising Injury
• Fire Legal
Other Included Coverages
• Debris Removal
• Pollution Clean Up and Removal
• Increase Cost of Construction
Coverage Enhancement Endorsement
• Backup Sewers and Drains
• Customer Property
• Outdoor Signs
• Increased Cost of Construction
Novita’s Insurance Solutions for Light Industrial Parks
Novita Insurance Solutions offers comprehensive Commercial LRO insurance for clients, with Open Perils property coverage, including no coinsurance and 3-tiered coverage (Base Policy; and Gold and Platinum endorsements with additional eligibility requirements), with individual policy issuance. The company’s multiple loss settlement provisions available include:
• Extended replacement cost (125%; check with us regarding additional eligibility requirements)
• Replacement cost (100% to value)
• Agreed amount
• Actual cash value
LRO-specific General Liability at $1M and $2M, and minimum $1,000 retention level. Property coverages are available as Mono Line or Package.
Contact Novita for eligibility guidelines; we’ll work with you to structure a program to help your light industrial park owners protect their investment.