Industrial Real Estate: The Hidden Asset Fueling High-Yield Passive Income
Is Industrial the Best Real Estate Asset Class in 2024?
Industrial real estate has quietly transformed into one of the world’s most sought-after asset classes, thanks largely to the explosion of e-commerce. This surge, accelerated by the COVID-19 pandemic, has driven the construction and leasing of over 2 billion square feet of warehouse space in the U.S. since 2021. Millions of consumers shifted their purchasing habits to online platforms, requiring expansive warehouse networks to facilitate fast, reliable delivery directly to their doorsteps.
This substantial shift disrupted traditional retail, office spaces, and restaurants while benefiting logistics giants like Amazon, meal delivery services, and home improvement suppliers. The pandemic also exposed vulnerabilities in global supply chains, leading to significant delays in essential goods—particularly those manufactured overseas. To address this, companies have turned to onshoring and reshoring, producing and warehousing goods closer to home, further fueling the demand for industrial space.
Buildings Constructed Since the 1970's Under 50,000 Square Feet
Industrial real estate, once a hidden sector located in industrial parks far from public view, has seen a meteoric rise. The chart above depicts how rents have grown steadily at around 3% annually over the past 50 years, with occasional declines during economic downturns. However, recent years have brought dramatic growth, with rents surging by 10% annually since 2021—a staggering 40% increase in just four years.
Tenants Remain in Buildings for an Average of 15 Years
What makes this sector particularly appealing is the “sticky” nature of its tenants. Companies rarely move because of the high costs associated with relocating equipment, retraining a skilled and trained labor force, and disrupting operations. Many tenants sign long-term leases with built-in rent escalations, providing investors with predictable income and the prospect of rising property values.
This is an example of a typical mid-sized industrial building in the Chicago market.
Industrial real estate also stands out for its low-maintenance nature. Unlike multi-family housing, where landlords manage numerous tenants and repairs, industrial tenants typically handle their own maintenance, from fixing roofs to mowing lawns. They even typically pay for property taxes and insurance, reducing the owner’s responsibilities and enhancing the investment’s appeal.
As warehouse demand and rental rates continue to rise, investors in industrial real estate are enjoying both high passive income and long-term value appreciation. For those seeking a resilient, high-yield investment, this sector is a great option. To explore investment options, contact Joel Friedland at (847) 345-5534 or visit britproperties.com.