How to Invest in Toronto Industrial Real Estate?

When you think of investing in real estate, many people probably imagine buying a residential home to rent out. However, you never want to overlook the outstanding opportunities in industrial real estate. In Toronto and GTA, new warehouses, distribution centres, and manufacturing facilities are changing hands or entering the development stages all the time.

The right investor with expert guidance can enter the market at any stage and potentially see an excellent return on investment. In this post, we’ll talk about some of the potential challenges and what it takes to succeed in today’s market.

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Start by Gathering Your Network

Inside knowledge goes a long way when dealing with any transaction or investment. Access to a professional network is even more critical in industrial real estate, no matter how much experience or capital you have.

OG Realty Group provides exceptional guidance and white-glove service in all aspects of commercial real estate investing. You can expect nothing but the best, whether you’re looking for an owner-occupied property, something to lease to another business owner, or selling later for a profit.

Do you have a particular property in mind or want to find suitable land to construct an industrial facility? Working with us means you can access vetted funding companies for construction loans and mortgages and general contractors to outfit your facility for specific industrial use.

Our network also includes premium construction companies that can perform the job to your high standards. We will connect you with our contacts who help you apply for permits and put you in touch with engineers and architects to create the drawings.

Our experienced contacts will be there for you to oversee the construction periods. There is no need for you to waste time seeking out contractors who aren’t the right fit; we have already performed extensive research. You have our full support from start to finish.

Learn more about OG Realty Group and how our team can help with all of your commercial investments right here.

What Resources Do You Need for Industrial Real Estate?

Though technically, anyone with access to funding could invest in industrial real estate, not everyone should. This type of venture is best suited to those willing and able to withstand a certain amount of risk while performing in-depth market research and due diligence on a property.

In addition, you should have some industry connections who can advise you on the merits and potential downfalls of any particular investment. No one person knows it all, and no one ever succeeds alone.

If you’re going to become a seasoned industrial investor, your support team will consist of a real estate agent who specializes in commercial, a property manager, a lawyer, an accountant, and possibly an engineer or architect.

Once your team is in place, you’ll need access to significant amounts of capital as well as the ability to acquire financing. The funding can come from a variety of sources, including commercial mortgage brokers, traditional lenders, private lenders, or equity funds.

Are you on the hunt for your next investment in Ontario? Read on to learn How to Buy a Commercial Property in Toronto and GTA.

Why Invest in Toronto Industrial Real Estate?

Toronto is an economic powerhouse in North America, with major developments in manufacturing, logistics, warehousing, technology, and e-commerce. Every industry is growing, which means commercial real estate is in high demand. Couple that with the limited supply of available land, and property values are expected to rise for the foreseeable future.

Investing in industrial real estate presents stable income streams from long-term leasing, as well as the potential for equity gains as real estate values rise. Commercial real estate can also offer tax advantages that you may not see in residential or other investments.

How Is Industrial Real Estate Different from Residential?

While investing in any type of property takes careful consideration and attention to detail, everything happens at a higher level when it comes to industrial. Here’s a side-by-side comparison of various aspects:

The tenant profile looks different. Industrial tenants are typically long-established businesses with a strong presence in the city. Residential tenants consist of individuals and families. Some may be long-term residents while others are living in the city temporarily, such as for school or work.

Industrial leases are more for the long-term, sometimes lasting for several years. Residential leases are typically one year or less before reverting to a month-to-month term.

Residential real estate can be safer and more stable. No matter what happens in the economy, everyone will always need a place to live. Industrial is riskier since a company might go out of business, and it can take a long time to replace them. In the meantime, you’re still responsible for all of the carrying costs.

What Type of Investor Should Consider Industrial Real Estate?

As a city constantly growing and evolving, Toronto will always have lucrative opportunities for industrial real estate investors. However, there are also downsides and complexities, and this path isn’t for everyone. How do you know what’s right for you? Consider your investor profile.

Are you planning to invest for the long term? Though the returns can be substantial, the holding period for industrial real estate can be many years. Patience and persistence are a must.
Do you have the resources to weather the ups and downs of investing at this level? Like any market, commercial real estate can be volatile, with economic downturns, supply chain issues, and business management can all affect your outcome.
How much experience do you have? Industrial real estate is generally better for advanced investors who understand the analytics involved. If you have capital but lack experience, working with a knowledgeable team like OG Realty Group can ensure you stay on track to reach your goals.
Do you have enough capital and access to financing to purchase or develop industrial properties? Keep in mind that commercial real estate tends to be more expensive and requires higher down payments than residential.
What are your goals for the property? Are you planning to buy and sell at a profit later, launch or expand your own business, or lease the building to other commercial tenants?

Industrial Real Estate Investing From A to Z

What are your next steps once you’re determined to move forward and you’ve found the right experts to support you? Industrial real estate is complex and rewarding. Your plan will likely evolve and adapt as you proceed. However, it will help to have a framework in mind. Here are just a few action steps that will help you move to the next level:

Assess your strengths and challenges. You’ve already started to analyze your finances and goals to decide whether to invest in the first place. Now it’s time to take it even further.

Determine Your Goals and Budget

Industrial real estate investing can be lucrative, but there is also a higher barrier to entry than with residential. On a positive note, you have multiple options to grow your wealth and portfolio.

The most obvious path is to purchase a property for your own business use, either to launch your startup or expand as your equity grows.
Many investors lease the property to other business owners. A strategic purchase can mean earning passive income every month from tenants who typically stay for years. In addition, you’ll benefit from equity gains as real estate values rise.
You could choose to buy a property now and sell it later after it grows in value.

Investing in industrial real estate in Toronto doesn’t just come with high property prices. You will also have to cover greater closing costs, more substantial renovations, and operating expenses.

Financing an industrial investment can be one of your top challenges. Learn more in How to Finance Buying a Commercial Property in Ontario.

Understand Your Risk Tolerance

The potential for greater rewards is often coupled with a higher level of difficulty and more pitfalls to be aware of. Before committing to a particular investment, you want to know that you’ll be able to recover if the worst were to happen.

Economic changes can lead to fluctuations in property values and the demand for commercial real estate to rent or buy. If you’re investing for the short-term, you could lose money as you won’t have time for the market to rebound.
At these dollar amounts, even a small change in the interest rate can affect the affordability of your investment. Renovations and operating costs can also increase.
Commercial agreements can happen slowly, which means your unit might be vacant for an extended time before you find a tenant. Can you carry the costs of the property until then?
Changes in tax or zoning laws can make running your business more complicated.
Industrial real estate can be an extremely valuable asset, but it is not the same as liquid cash. You may not be able to sell the property quickly if you run into financial trouble.

Perform Extensive Due Diligence

The best way to minimize all risks and overcome the unique challenges of industrial real estate investing is to perform extensive due diligence. Work with an experienced real estate agent to assess the feasibility of a particular project before committing to any purchase or contract. Here are just a few factors to look into:

Examine the structural integrity of the building.
If buying vacant land, look into the zoning laws to ensure you will be able to build according to plan.
Arrange for an environmental assessment to identify any hazards or concerns.
Conduct an extensive income and expense analysis to ensure the investment is financially sound. Be sure to consider all operating expenses, including taxes, utilities, and any maintenance or repairs.
Research the demand for industrial spaces such as the one you are considering and connect with potential tenants.
Consider how much insurance you will need to protect your investment.

Are you ready to make your next commercial purchase? You might just find the perfect opportunity in our featured listings right here.

Research the Market Itself

Spotting a lucrative opportunity depends on extensive research and analytical ability. While no one can predict the future, current data can give you some insights into long-term economic trends which can influence your decision to buy, sell, or hold a particular property.

The level of detail required is another reason your real estate agent should have experience with commercial investments. Think of the vacancy rates, rental prices, and amount of demand in the various sectors across Toronto. Compare your projected earnings with the costs of acquiring and carrying the property, and be sure to cushion your budget for the unexpected.

Insight into the market can help you understand the advantages and disadvantages of a particular property and avoid investments that are likely to go sideways. Throughout all of this, keep your end goal in mind. The right venture can get your money working for you and generate positive cash flow and significant equity gains for years to come.

Do you want to know more about the potential of industrial real estate in Toronto? I am happy to help you formulate a winning strategy for your investments. Connect with me at OMarjanovic@kw.com or call 647.620.2882 to learn more.