The industrial real estate market can seem like an intimidating topic, even to many experienced investors. What is industrial real estate? The term falls under the umbrella of commercial, which in turn means anything business-related.
Types of industrial properties include warehouses, distribution centres, manufacturing sites, and cold storage facilities. Any way you look at it, there are plenty of excellent opportunities for the right type of investor.
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Why Consider Toronto Industrial Real Estate
Toronto alone has a population of nearly 3 million people. Add in the rest of the GTA, and that number soars to approximately 7 million. To put it in perspective, it’s nearly 1/5 of the total population of Canada, all concentrated in one massive metropolis.
A high population fuels a strong supply chain, and a low vacancy rate for buildings means real estate values are likely to grow. Whether you plan to lease out your building or run your own operation, owning industrial real estate in Toronto can be a reliable path to a strong economic future.
Are you planning to start, buy, or grow a business? You’ll find valuable tips in the posts below:
- Questions to Ask Before Buying a Business
- Should You Buy or Lease a Commercial Space?
- How to Finance Buying a Commercial Property in Ontario
Who Should Invest in Industrial Real Estate
Toronto real estate is already among the most expensive in Canada, and commercial buildings even more so. As a result, investors generally have some experience in addition to access to large amounts of capital.
A notable exception could be an individual with an inheritance or other windfall who wants to get those funds working for them. REITS (Real Estate Investment Trusts) and pension funds allow for more of a hands-off opportunity for someone beginning their investment journey. For greater potential reward (and risk), private investors and developers can look into buying or managing industrial properties.
Lastly, corporations are frequently involved in industrial real estate. Large companies, such as Amazon or Home Depot, can acquire more properties for warehousing and distribution.
Choosing Your Property
Buying a commercial property can be a risky venture if you don’t have all of the facts beforehand. That’s why it’s highly recommended that you work with a commercial real estate agent right from the beginning.
We can sit down and discuss your goals, resources, and any possible risks that you might face when searching for your next property. An experienced professional can also give you some guidelines on what to look for, such as a proper ceiling height, a building with an adequate number of loading docks, and sufficient parking.
A due diligence checklist could also include environmental assessments, zoning regulations, the age and condition of the building, and any future developments that might impact your business later on. We can also go over any inspection reports with you to see how much work will be involved in preparing the unit for your operations. Once everything in the building passes scrutiny, we can move forward with the acquisition.
The Buying Process for Industrial Real Estate
If you haven’t already, it’s time to assess and organize your finances so you’re in a position to make a strong offer on the property. Most commercial lenders require that you have a 20 to 35% down payment before approving your loan.
Before finalizing, the lender may also want an appraisal to determine the fair market value of the building and proof of insurance. A commercial real estate agent isn’t directly involved in arranging financing, but we can still offer invaluable support throughout this process.
For example, we can put you in touch with some of the top commercial mortgage companies in Toronto, as well as make sure the terms are fair for you. Before agreeing to a loan, you’ll want to be sure that the interest rate and total amortization period are reasonable.
Should you invest in commercial or industrial real estate? The posts below will give you something to ponder:
- How to Invest in Toronto Industrial Real Estate
- Most Lucrative Commercial Real Estate Investments in Ontario
- What is TMI in Commercial Real Estate?
The Legalities of Industrial Real Estate
When a seller accepts your offer, you’ll submit a 5 to 10% deposit that will be held in trust until your closing date. If there were any conditions, you’ll need to sign a Notice of Fulfillment or Waiver before the transaction can proceed. This removes those conditions and makes the contract firm and binding.
As with a residential home purchase, there is now a closing period before you take possession of your industrial building. A real estate lawyer performs a title search to ensure there are no encumbrances on the property. They’ll also review any easements, liens, or restrictions while checking that the zoning certificate matches your intended use.
During this process, you’ll need to obtain insurance for your commercial property, complete with liability and building coverage. You’ll also contact all utility companies so your hydro, water, and gas are ready to go from the day you take possession.
On your closing date, you’ll pay the balance of your down payment as well as any other closing costs, such as land transfer taxes and any applicable HST. Once all is said and done, you get the keys to the building, and you’re ready to succeed in your new or growing business.
Are you searching for the perfect opportunity in commercial or industrial real estate? Connect with me at OMarjanovic@kw.com or call 647.620.2882 to learn more.
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