Importance of the location in the Industrial Real Estate
Person 1 – Amit – Congratulations for the fantastic views of the Webinar. It clearly reiterated the fact that the Industrial Real Estate sector is set to grow .
Hey Amit, you keep advising so much on Industrial sheds and warehousing as the best asset class and phenomenal demand – but when I drive around Chennai, I find that so many sheds are vacant and not leased. Can you clarify Why are so many sheds vacant ?
Amit – Wrong Location, Wrong Location, Wrong Location: It might seem the same but there are 3 different aspects to look at again:
- The land should be under a master planned area to ensure that this becomes part of a larger city and gets necessary attention in all aspects required for development .
- Potential to be a residential hub in the next 20 years – the area should be very close to an industrial area but shouldn’t be part of a government estate to permit conversion later
- Basic Infrastructure should be available today – One should physically measure the tarred portion of the road !! It should be 30 feet wide and highways should be in vicinity with public transport nearby .
- Built as per knowledge – Owners do not pay attention to the needs of the market and build whatever they know or what they have seen and heard about which might be Cost effective in the short run but non lucrative in the long run . Though “Cost saving “ should be taken into consideration but cannot be the decisive factor to zero down the Specifications .
- Most owners have limited understanding of who is the end occupant or their requirements. The reason why this is important is because every micro market is suitable for a different tenant type. Every tenant requires different compliances to be followed which further lead to varied requirements of the prevailing type of development .
- The RIGHT FIT concept is apt here as well – sizing is to be studied to de-risk .It is important not to build very big sheds which end up being vacant and not to settle down with smaller sizes as it has direct consequence with the tenant quality.
- Wrong specification – The Modern set ups require more height, wider apron areas, more number of shutters, fire safety protocols etc to be able to cater to the product specific requirements .
– Since ROI is the main focus and investors tend to work on a budget – saving money spoils the ability to rent while overspending spoils ROI
The above precisely are the reason that sheds are vacant in such a buoyant market..
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