Investment Grows in Warehouse Sector

Investment in the Warehouse Sector Is Growing
Industrial warehouse space has gone through a revitalization in the past few years, and investors’ perspectives have evolved. Many investors now find value in having this asset class as part of their overall commercial real estate portfolio. In addition, Real Estate Investment Trusts (REITs) have made entry into this sector more accessible by allowing smaller-scale investors to participate either through a diversified REIT portfolio or as part of a specialized product. For those considering an investment in this sector, it’s important to be aware of the following trends:

Automation vs. manpower. As businesses adapt to automation technologies, warehouses have a unique opportunity to raise the traditional roofline, which had been limited by their need to use manpower-assisted equipment to retrieve inventory. Robotics has introduced a way for warehouse owners to reduce their overall footprint while maintaining the same amount of inventory space.

On-demand shipping. The need for suppliers to rapidly turn over inventory has increased the demands on both warehouse owners and logistics companies. Radio Frequency ID (RFID) has allowed warehouse operators to easily access and transport tagged goods, while GPS permits vendors to track shipments and quickly respond to shortfalls/surpluses.

Flexible warehouse space. As online retailers gain prominence, flexibility in warehousing has become a major selling point for those looking to invest in this asset class. The always-changing logistics and retail environment is requiring developers of new warehouse projects to build in flexibility; the ability to convert the space to office or other commercial uses has become almost as important as location for investors.

Failure Can Lead to Success … If You Learn from It

Nobody sets out to fail. Nobody plans to make mistakes. But perhaps they should – because everyone knows you can learn a lot from failure.

While nobody likes to fail, studies show it isn’t necessarily a bad thing. Mistakes may highlight flaws that, when overcome, lead to success. After years of failed electrical experiments, Benjamin Franklin finally achieved success. When he did, he claimed he hadn’t failed but instead had discovered 10,000 ways electricity doesn’t work.

Franklin’s positive attitude got results, whereas fear of failure may stop you in your tracks.

Harvard Business School professor Amy Edmondson coined the phrase “psychological safety” to describe feeling secure enough to take risks and to accept the possibility of making mistakes.

This is an important concept because it’s hard to make progress without it. If individuals worry that major repercussions are sure to follow an error, they’ll keep doing what they’ve always done. And presto – opportunities for innovation, creativity, and change evaporate.

In fact, a company with a culture that learns from mistakes can gain a competitive advantage. As Edmondson points out, “a culture that makes it safe to admit and report on failure can – and in some organizational contexts must – coexist with high standards for performance.”

Today, companies must take every competitive advantage available – including learning from mistakes. Currently, however, those who do are few and far between. Notes Edmondson, “The wisdom of learning from failure is incontrovertible. Yet organizations that do it well are extraordinarily rare.”

It’s time to make your mistakes work for you.

Be Smart about Protecting Your Smartphone

Your smartphone is a treasure trove of personal data and confidential corporate information. It probably offers access to passwords, financial accounts, credit status, and purchasing habits, not to mention your online browsing history. It contains information that can be used to track where you’ve been and even ascertain whom you’ve met with. So much for private conferences.

All that’s keeping this information away from would-be hackers, trolls, and cyber criminals is a simple password or fingerprint scan, both of which could easily be bypassed by someone with bad intentions and the right tools.

Fortunately, smartphones are getting smarter about security, and phone manufacturers are working to build devices that are less hackable. Some devices now feature encryption software to safeguard against breaches. Others hide users’ personal or confidential information behind a type of firewall.

At a more sophisticated level, phones have been developed for the defense and intelligence communities that store data on a separate device so that if hackers penetrate a phone, there’s nothing to find. These phones also have a self-destruct mechanism that activates if someone tries to open or compromise them in some way.

Barring purchasing a defense-grade cell phone, your best option for securing your data is to keep your phone and apps up to date and to notice if your phone is behaving strangely or uncontrollably. Don’t click on sketchy links, never loan your phone to a stranger, and avoid public hot spots.

Think about it: You secure your car with an alarm system. You’ve likely installed a corporate security system and protected your business from cyber attacks. You’ve trained employees to recognize scams. So, protect your smartphone now – and urge your employees to do the same.

The Pros of Investing in Mixed-Use Properties
As urban expansion increases in many metropolitan centers investors are seeing the value in mixed-use developments.

Why? The combinations of retail, office, and residential space offer many attractive qualities that investors seek. And although there are challenges with mixed-use space, the benefits may well outweigh any apparent negatives.

Here are three benefits to investing in commercial mixed-use real estate:

More efficient land use

Designing your mixed-use building with an emphasis on vertical layout will not only reduce the overall building footprint – which has the effect of keeping property taxes at a manageable level – but also will accommodate on-site add-ons, such as underground parking. This offers maximum benefit from the available space.

Future urban planning with a mixed-use building model can reinvigorate city centers on the verge of stagnation. Not only will the mixed-use building optimize usable space, but it will also provide new opportunities for employment and reinvestment into the surrounding businesses and infrastructure.

Increased opportunities for sustainability with diverse tenants

The mixed-use building also allows investors to attract and retain a more diverse tenant base when complementary businesses can be housed in the same property. This will increase opportunities for the overall sustainability of the property.

Many traditionally designed buildings are operated on a limited schedule, meaning that for several hours each night, operations within either shut down or operate minimally.

A mixed-use building, however, has the potential to operate 24/7, increasing its desirability and spreading out the draw on utilities from peak time to more sustainable levels. Furthermore, the ability to plan a balanced energy draw allows for the implementation of green innovations and other initiatives not traditionally utilized in larger-scale operations.

In the popular triple-net lease model, where operational costs are recompensed by the tenant, the investor has minimal direct incentive to provide innovative energy-saving initiatives. Tenants, however, are seeing the increased value to themselves and are willing to pay a competitive lease rate for a longer term to remain established in a building that meets their energy and other needs.

Longer-term lease options can reduce life-cycle costs

Mixed-use properties offer lease term flexibility, which you would not find available in most traditional residential properties. Residential tenancies in most regions only allow for lease terms of up to one year. However, retail and office spaces can offer terms up to 10 years.

As a result, life-cycle costs can be reduced in a mixed-use building.

With strictly residential complexes, there is an expectation that when a tenant vacates the building, the units are painted, repaired, and updated as needed.

On the other hand, commercial units, which usually have a longer lease term, can expect a lower turnover rate, meaning the life-cycle costs of individual units in a mixed-use building are offset by the lower turnover rate in the commercial units.

If you, as an investor, are interested in multi-unit properties, discuss this asset class as an investment in neighborhoods that interest you with your commercial real estate agent.

SA Realty Watch Group
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This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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