Industrial

Overview

Warehouses, distribution centers, last-mile logistics, light manufacturing, sometimes flex space. DSTs in this space took off with the e-commerce boom and the post-pandemic supply chain reshuffle. You'll see both single-tenant deals (often Amazon, FedEx, a regional 3PL, or a manufacturer) and multi-tenant business parks. The good ones have functional building specs, meaning high clear heights, deep truck courts, plenty of dock doors, and good highway access.

Analyst Notes

When you look at industrial, ignore the marketing photos and read the building specs. Clear height, truck court depth, dock door count, column spacing, trailer parking. Then check location relative to major population centers and freight corridors. Compare the sponsor's purchase price to recent comps in the same submarket. A lot of industrial DSTs were bought near the peak, and the basis matters more than the tenant story.

Advantages

• E-commerce demand and supply chain reshoring have been steady tailwinds for over a decade.

• Operating intensity is low. These are simple buildings with one or a few tenants, no common areas to maintain, and minimal capex outside of roofs and parking lots.

• Functional buildings appeal to a wide range of users, so re-leasing risk is lower than with specialty property types.

Disadvantages

• Cap rates got crushed in 2021 and 2022. Some DSTs from that vintage are sitting on aggressive bases that don't pencil at today's interest rates.

• Single-tenant deals concentrate credit risk on one user, and if that user leaves, you may face six to twelve months of vacancy plus re-leasing costs.

• Functional obsolescence is real. Buildings under 28 feet clear, with shallow truck courts or limited dock doors, struggle to compete for modern logistics tenants.

Frequently Asked Questions (FAQ)

Property Type Performance Averages