How does industrial RE hold up during a recession?
I’ve got an LOI submitted for a 32,000 sq ft industrial building, and I’m curious how the performance may be if we head into a recession. Currently sits at an 8 cap, but only 2 years left on a NNN lease (tenant relocating at end of lease so will be vacant). 

On the plus side, it’s a nice building, fairly well maintained, office spaces areas esthetically pleasing, and has good power supply (2000 amps) for manufacturing within the warehouse area. Very close to major roadways, and located in an ideal industrial area (couple blocks known for Commerical space in the same area). Current rent is bellow market due to owner occ rent back in effect. With current median market rents, it would have been between 9.5-10 cap. Located in a “safe” city, median household income is 100k in 3 mile radius. 

On the negative side, there are only 2 years left on the lease and I’m concerned of a prolonged vacancy if we are entering a declining GDP environment/recession (carrying costs are high). It will need a new roof within 5 years. And it doesn’t have a loading dock, the garage doors are grade level. 

What’s your thoughts?
[{"id": "ibk5cw0", "text": "If you break it into 12 - 2700 sf units, you'll get a premium for the spaces you lease out and very likely never be more than 20% vacant.\n\nIn a good economy, most want to expand.  In a bad one, someone's wife somewhere is sick and tired of letting her husbands crew use her bathroom.", "replies": [{"id": "ibk6y1g", "text": "Really hard to do depending on the situation, especially if it\u2019s a purpose built owner occupied building. Biggest thing is bathrooms for the individual units.. hard to redo plumbing through a concrete slab.", "replies": [{"id": "iblfc42", "text": "Easy to do.\n\nInsanely profitable.\n\nAnd when you lose 1 of 12 tenants....you still have great cash flows.\n\nStill true if you lose 40% of your tenants, because at 2,700 sf, you're getting 150% of the 32,000 (per) sf rent.", "replies": [{"id": "ibliadc", "text": "What\u2019s the build out costs on average? Is every unit individually metered and individual hvac? \n\nI see the benefits (increase rent, decrease vacancy), but not sure about the execution. Median vacancy for comps right now is 4 months from vacant to new lease agreement.", "replies": [{"id": "iblp0wu", "text": "What does a car cost?\n\nIf your spaces need HVAC, I would imagine each new space should also have it.\n\nMetering, I would put in separate meters but can your systems be separated with sub meters? Most can't...some can.\n\n*\"Median vacancy for comps right now is 4 months from vacant to new lease agreement.\"*\n\nOn what product?\n\n*\"This area has a couple dozen industrial buildings mostly in the 20,000-40,000 sq foot range. So 32,000 is squarely in the middle.\"*\n\nDoes your market have 1,500 - 3,000 sf industrial rentals? Comparing those rentals to 20,000 - 40,000 sf units is like comparing a TV clicker to a Chevy Truck.", "replies": [{"id": "iblv51c", "text": "Thanks for your thoughts. I understand your points. \n\nGuess I just see it as a risk to subdivide. Tenants look in this area (couple of blocks) specifically for the 20-40,000 sq foot spaces. Same as seeing a handful of fast food restaurants next to each other, they all know the demos work and people all know go to this street to get a quick affordable meal. Not sure I wanna buy a McDonald\u2019s on a strip with all the fast food chains, then convert it to a Steak House. \n\nThat said, I appreciate the creativity and will explore the option more. Having an alternative plan when vacancy comes up is just solid preparation. If costs are reasonable enough to offset future vacancies, then it may make sense to consider after owner lease back is terminated in 2 years. \n\nThank you.", "replies": [{"id": "ibo3n7c", "text": "&gt;Not sure I wanna buy a McDonald\u2019s on a strip with all the fast food chains, then convert it to a Steak House.\n\nExcellent decision (because you'd actually be converting a steak house in to a strip with all the fast food chains...which, for clarity....would be a very smart move).", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "ibm3fyd", "text": "That is impossible to know without knowledge of the local building codes and layout of the property.", "replies": [{"id": "ibmlcqx", "text": "Ya gotta have electricity to light a light bulb.\n\nSome things are fairly basic.\n\nAs well as....understood.\n\n*^((See previous comment for greater clarity.  It's not lacking).)*", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "ibkb8tr", "text": "I\u2019m not sure what you mean? 2700 sq feet is far too small to be practical. This area has a couple dozen industrial buildings mostly in the 20,000-40,000 sq foot range. So 32,000 is squarely in the middle.", "replies": [{"id": "ibkg7lj", "text": "I have to disagree\u2026we have been putting up 1200 sq ft \u201cservice bays\u201d (bathroom and OH door) and 2400 sq ft (office + bathroom + OH doors) 12X at a time and they\u2019ve been rented before they were even complete. There\u2019s a lot of smaller owner/operators looking for storage/man-cave/light industrial/warehouse space for their hobbies and/or businesses in my area.", "replies": [{"id": "ibmhj4j", "text": "I totally agree with this as well! Here\u2019s my experience having 14,000sq of warehouse space and 17,000 of office space split into 22 units.\n\nThe office units are incredibly easy to lease. I\u2019m fully occupied with a ton of demand for small personable office units with private bathrooms for business professionals. \n\nWhen I move out of my warehouse, I\u2019m definitely going to split the warehouse into 4 different mini warehouses all with their own roll up doors and private bathrooms. It\u2019s much easier to rent out warehouse in the 1,500sq foot range because it\u2019s much more digestible and the tenant pool is far larger. I actually receive more calls for warehouse space then I do for office space. Prior to purchasing my business park, I rented warehouse at another location down the street. There was over 100 warehouses with in the 1,500-2,500 range and the entire business park is leased out for years. \n\nHaving a 30,000sq foot warehouse would be ideal if you could secure the tenant, but because the post hints at fears of long term vacancy, it only makes sense to perform a cost analysis of the mini warehouses inside the larger one to see how it compares.", "replies": [], "depth": 4}], "depth": 3}, {"id": "iblff8u", "text": "Read the comment below mine.  This guy gets it.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ibk69fc", "text": "Industrial won\u2019t have the jumpiness in all areas. \nAt the very worst of times you will still turn some cash flow and you won\u2019t have as much wear and tear.\nYou normally only need to repair the roof if anything.", "replies": [{"id": "ibkbtsa", "text": "Interesting. What do you mean \u201cat the worst of time will still turn some cash flow?\u201d My concern is a prolonged vacancy during a recession if manufacturing companies take a nosedive. \n\nAs for west and tear, I assume there is still plenty in an industrial unit, and far more expensive to repair versus apartment. Plus with a single commercial tenant, vacancy is most critical expense most likely.", "replies": [{"id": "ibn2oed", "text": "In the Great Recession we turned a couple bucks a sf and got the cam covered. Never had a vacancy for more then 45 days. \n\nAs far as repairs industrial is much better on average then commercial and especially residential. The largest issue we have had in the past was environmental clean up after an eviction. Cleaning out an old paint shop we had 600 1 gallon automotive paint cans to clean up.\n\nWith residential we always had the yearly turnover that required paint/molding touch up, carpet remove and tile installation/ tile repair, and reroof every 10-13 years to keep insurance active.", "replies": [], "depth": 3}], "depth": 2}, {"id": "ibl3xeo", "text": "any industrials in particular?", "replies": [], "depth": 2}], "depth": 1}, {"id": "ibk6bzy", "text": "Depends on the market. In my area the industrial vacancy rate hit nearly 30% in the depths of the Great Recession. I\u2019d look back to historical figures from 2008-2011 in your area to see what could happen.\n\nRun a proforma and see how much cash flow you can bank and then do a burn rate analysis on how long you could carry a fully vacant property. Get granular on it and make sure you understand how long you can feed it if you have to.\n\nAre you paying cash? A lender would definitely be questioning the lease term and would likely tie loan term to the lease maturity.", "replies": [{"id": "ibkae2x", "text": "This is helpful, thank you!\n\nI had not considered that the loan term may be connected to the remaining lease term. That\u2019s new to me. I am taking out financing so I\u2019ll have to question that for sure.", "replies": [{"id": "ibkem2s", "text": "With a single tenant occupied building typically the loan will contain a \u2018go dark\u2019 provision where the lender can call the loan if the tenant vacates. Either with the loan term or the \u2018go dark\u2019 clause you\u2019re going to be dealing with an accelerated loan repayment in all likelihood, I would definitely discuss with your loan officer.", "replies": [{"id": "ibkimy3", "text": "This isn\u2019t as common in industrial leasing, like you would find in retail (triple net). Plus, when OP is the landlord, they have control over lease documents for future tenants.", "replies": [{"id": "iblhxds", "text": "Curious, what do you mean by \u201ccontrol over lease documents for future tenants?\u201d What\u2019s the benefit on this situation?", "replies": [{"id": "ibljg5v", "text": "As the Landlord, you have ultimate say over what\u2019s going into the leases, you should work with a real estate attorney though.", "replies": [{"id": "ibljrud", "text": "Ah yes, I see what you\u2019re saying. For sure, future lease agreements would be longer duration. Average for comps here are 5-6 years. So ideally need to get through this seller lease back and flip relatively quickly into another lease. If market stays consistent (don\u2019t even need growth) then it\u2019s a very good opportunity.", "replies": [{"id": "ibmuws8", "text": "Make sure you get the seller lease back documents reviewed by your own real estate attorney. It\u2019s likely to be very favourable for the tenant and you should protect your interests.", "replies": [{"id": "ibmwnga", "text": "Yes, that\u2019s part of the DD. I am able to exit if agreeable lease terms are not obtained. I would have my own broker write the lease to present to seller.", "replies": [{"id": "ibn6kzc", "text": "Review it yourself, have your counsel review it as well.", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "ibm4i6v", "text": "You really think the bank is like \u2018well, this is an industrial property so it\u2019s fine if it\u2019s 100% vacant\u2019?\n\nAny competent lender will definitely put a go dark provision into the loan documents for a single tenant occupied building, it\u2019s just common sense.", "replies": [{"id": "ibmv8he", "text": "It\u2019s not always the case. I have lots of properties with debt and without those provisions. Heck, most ground leases don\u2019t require restoration of improvements in the event of a casualty so long as the underlying rent is paid.", "replies": [{"id": "ibmwj25", "text": "A ground lease isn\u2019t remotely the same as a commercial real estate loan.. it ain\u2019t even the same ballpark or the same league.\n\nWhether you have a go dark provision or not on a single tenant occupied building, you\u2019re still going to be in violation of a debt service coverage covenant and your loan is getting called either way, it\u2019s just a matter of how long it takes to get there.\n\nI recently had a single tenant occupied industrial deal at a 36% LTV and the loan has a go dark provision.", "replies": [{"id": "ibmwrg6", "text": "The ground lease is encumbered by debt, so yeah, it\u2019s kind of the same thing. You speak with absoluteness but the documents I\u2019m viewing say otherwise. You should perhaps be more open to the opinions of others.\n\nSpeaking to your 2nd comment which wasn\u2019t asked for but I guess I\u2019ll respond, often there is a cashflow sweep that comes into consideration should the vacancy be unexpected.", "replies": [{"id": "ibmz3ra", "text": "What\u2019s the term on your ground lease? How is that remotely applicable to an improved CRE acquisition with 2 years remaining on a lease for a single tenant occupied building? It\u2019s apples and oranges.\n\nHow would a cash flow sweep work if the building is unoccupied and not generating rental income? \n\nYou\u2019re the one that said that go dark provisions are not prevalent in single tenant industrial CRE loans, which is demonstrably false in my experience. Then you use a ground lease as an example. I\u2019m not here to argue, but what you\u2019re saying is completely wrong in the context of OP\u2019s question.", "replies": [{"id": "ibn6ius", "text": "The borrower would have to put up additional capital to offset the carrying costs during the period of vacancy. They have said elsewhere that their entire portfolio is profitable enough to offset those costs. Perhaps they could look into a portfolio loan, such as a cross-collateralised loan for this acquisition.\n\nGround leases are not just 99-years. They can be 5/10/20/30. It\u2019s just land instead of improvements and very similarly underwritten. I have provided direct help to OP in seperate conversations. \n\nSince, OP is in DD, looking to buy, they are also negotiating what is seemingly a sale/lease back that much has been disclosed. The terms of that agreement, are subject to negotiations; any debt they are taking on will need to be negotiated. That\u2019s kind of black or white. \n\nIt appears to me, you come from a lender background, perhaps in a quasi-analyst role. I guess we have irreconcilable differences of opinion, I don\u2019t expect you to listen. I\u2019m going to just avoid responding to your comments as I find you to be hostile and unpleasant to speak with. \n\nI don\u2019t know why but reddit has a lot of people who act different than they would in a conference room, sitting across from the people they are responding too. It\u2019s embarrassing.", "replies": [{"id": "ibnanq3", "text": "I pointed out to OP that the short lease term would be an issue for a lender and added some background. You\u2019re the one that piped up that go dark provisions are not common in single tenant industrial property, which is 100% false. Instead of dropping it you keep coming at me with stuff that is either not germane, combinations of what if situations or just flat wrong. Some people just have to be right in their own minds no matter what. You keep moving your responses from no go dark, to cash sweep to cross collateral. I don\u2019t know what OP\u2019s global situation is, I pointed out a potential pitfall in the deal to discuss with their lender and that would\u2019ve been it, if not for your blatantly untrue statement.\n\nI\u2019ve been an originator, I\u2019ve been an analyst, I\u2019ve worked for lenders, I\u2019ve worked for REITs, I\u2019ve worked in development. I\u2019m familiar with ground leases. I\u2019ve also managed my own projects and personally own residential rentals.. what does that have to do with OP\u2019s question?\n\nI\u2019m not trying to be an asshole, I just don\u2019t understand why you keep playing this what if game hell bent on proving me wrong. I haven\u2019t insulted you or said anything negative about you, just that you\u2019re factually incorrect about go dark clauses and single tenant industrial property. You\u2019re the one who can\u2019t accept that.\n\nEdit to say that a borrower putting up additional capital to re-margin a loan is not a \u2018cash sweep\u2019, it\u2019s a capital call and a significant restructuring of the loan.. once again you are incorrect.\n\nEdit #2 to see if this works, since I tried to reply again to apologize:\n\nRe-reading our comment thread and additional details on OP\u2019s portfolio I think we were just talking past each other and I was missing significant context of additional factors regarding OP\u2019s situation that you alluded to. I\u2019m sorry if I came off as unnecessarily hostile.\n\nI will stick to my guns that *most* single tenant industrial properties will have go dark provisions and those that don\u2019t will have significant mitigating factors, such as a global cash flow underwrite. So once again sorry if that was the context you were alluding to and I was missing. I wasn\u2019t trying to be an asshole, I just didn\u2019t understand the consternation around the go dark clause and I was looking at a stand alone project as presented in OP\u2019s post. My bad, I appreciate reasonable discussion and I don\u2019t seek to pick fights for no reason.", "replies": [], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ibkgiir", "text": "A short lease term can make financing it a challenge. How much leverage do you need? The dark value, LTDV at vacancy, and asset quality will be a big factor. \n\nOn average, you\u2019re probably not going to get much traction with a bank or credit union unless you have a strong relationship, outside income, strong liquidity, and/or exceptional lease comps. It doesn\u2019t sound like you have any experience leasing a property, so that will be another hurdle that banks/CUs consider. \n\nIf you need leverage, you\u2019ll probably have to go with a private bridge lender. High single digit rates, 2-3 points total, 75%-85% of dark value +/-, and a 2-3 year term at best.", "replies": [{"id": "iblgjbt", "text": "Thank you for your comment. You\u2019re correct in I don\u2019t have experience in leasing industrial space. My holdings are all single family or multi family residential, and even with several dozen units/transaction I can understand the lack of crossover benefits. \n\nI\u2019m looking for a LTV of 30%, as it\u2019s a 1031 opportunity and I like to hold a fair amount of reserves rather than a larger downstroke. I do have a decade long relationship with 2 separate commercial lenders, and my overall RE portfolio is around a 40% LTV. My stock portfolio represents enough value to cover all outstanding mortgages including this new addition (but obviously this equity would be effected in a recession). Lease comps show comparable rents at 7-9$ NNN, and current tenant is owner Occ paying $6NNN. At median comp rent rate, this property would be a 10 cap at lease renewal. \n\nDoes any of that make a difference in your opinion? \n\n(I will obviously be reaching out to my lenders when I hear if the LOI is accepted, thanks for bringing me concerns to ask about at the start)", "replies": [{"id": "iblwt1i", "text": "This makes a big difference! That\u2019s why I always throw in an \u201con average\u201d disclaimer.\n\nVirtually any conventional lender will consider a 30% LTV loan. Having liquidity &gt; total mortgage debt and only 40% leverage on your existing portfolio are big mitigants. \n\nIt\u2019s also a bonus if your existing portfolio generates enough cash flow to cover the proposed debt with no income from the subject property. \n\nWith these factors in play, it shouldn\u2019t be very difficult to get good financing.", "replies": [{"id": "iblzmdh", "text": "Good to know, I wasn\u2019t sure if I was missing something! \n\nYes, cash flow of other properties would cove carry costs for the new purchase. Only issue is how recession (if imminent) would impact overall portfolio performance (both stocks and investment RE). I\u2019ll try to beef up cash reserves, but I hate the idea of keeping massive amounts of cash on sideline, even though it would make me sleep much better at night \ud83d\ude2b", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "iblvvv4", "text": "What\u2019s the easiest way to get the historical lease data for this area? I\u2019ll ask my broker but don\u2019t mind doing my own search as well.", "replies": [{"id": "ibm3omu", "text": "There should be a local market report put out by a brokerage or appraisal firm. Your broker should know where to get it.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ibk6npg", "text": "It\u2019s been one of the strongest assets classes in Houston real estate at the moment. Although all things change with availability over time.", "replies": [{"id": "ibkbvdx", "text": "What cap rates you seeing there?", "replies": [{"id": "ibkg4xj", "text": "Things around 6% are moving pretty quick. Last I checked we\u2019re looking at anywhere from 4 - 6 % for districution and manufacturing vacancy rate, with manufacturing being the limiting option at the moment.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ibkciao", "text": "If you have the ability to personally cash flow it until it\u2019s leased up, don\u2019t forget about the TI allowance you\u2019ll be asked for by the next tenant, you\u2019ve also got all CAM to cover while vacant. If you can do that, then for sure buy the building. You\u2019ll look back 5 years from now happy with your investment. If not, don\u2019t. Bank might not even finance it with leases rolling off anyway unless you\u2019re strong personally/financially", "replies": [{"id": "ibkehca", "text": "Good points. I had considered the CAM charges during vacancy, especially since the current lease is NNN and I don\u2019t have to pay property taxes until it gets empty. But I had not really thought about TI\u2019s. I was under the impression that TI for industrial is less common, and much more prevalent for retail or office space. Is that your experience? \n\nCurrently mean vacancy for comps is 4 months from listing to lease. I can carry double that, but in a recession, who knows what else we will be dealing with. \n\nSince I have 2 years left on the NNN I would set aside all cash flow into reserves until the next lease is signed. This 2 years of surplus savings would cover me for an approximate 12 months of vacancy carrying costs.", "replies": [{"id": "ibkpzxy", "text": "Common industrial TI in my market is office area only paint and flooring.  Anything else is rolled into the new rental rate and amortized over the lease term.", "replies": [{"id": "ibksomt", "text": "Agreed.  TI is usually carpet and paint, maybe moving a wall around in the office.  Usually not much needs to be done in warehouse.  Maybe upgrade lights to LED if lights are old but the tenant should contribute to that cost as they benefit from lower electricity bills.  \n\nIf it's vacant and you get a tenant who needs a dock door, tenant could get a portable ramp.  As long as there is room for a 53' trailer to turn around.  8 cap is solid!   Is it a concrete building with decent clear height - at least 20 feet?  Is there extra land that could be leased as yard space at premium?  Typical building sits on 60% of land.  Anything extra you could arguably charge for yard space.", "replies": [{"id": "ibliw16", "text": "That\u2019s about what I expected for TI. I will look into the portable ramp option, I am a bit concerned that none of the doors have a loading dock. The interior height is 18 feet to bottom of trusses. There are some cut out \u201cdog houses\u201d that reach 20+ feet in a couple areas. I believe the property is about 60% land, and it\u2019s mostly all concrete adjacent to the building, plus 2 asphalt parking lots.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ibkkw26", "text": "No dock seems a little scary. I feel like that would significantly narrow your pool or prospective tenants", "replies": [{"id": "iblj4kl", "text": "Yes that\u2019s a concern for me as well. I imagine an area can be excavated in the back for a loading dock, but not sure on expense to do so.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ibluh3u", "text": "Definitely cost out a sub divided unit cost. They are always more work but it\u2019s a good back up option for your building. \n\nI don\u2019t know what market but I would say you don\u2019t even need suite restrooms or HVAC. Plenty of guys will use a shared space if they\u2019re paying a gross lease. \n\nWhats your leasing broker say? Their advice trumps everyone in this thread.", "replies": [{"id": "iblvpyc", "text": "Solid input. I agree, having a back up plan is useful, even if never deployed. \n\nMy broker is very familiar with this territory in particular, and says it\u2019s a great deal. I asked about splitting into just 2 units on our walk, and he actually said if anything he would expand and add additional space to the back. He has very large commercial clients and has seen them \u201cdo that dozens of times.\u201d So he was rather turned off with the subdivide strategy and more inclined to recommend bigger as a value add strategy.", "replies": [{"id": "ibm31c7", "text": "Sure. If you can stomach that risk, cost scenario. How many acres?", "replies": [{"id": "ibmm8g6", "text": "Approximately 2.3 acres", "replies": [{"id": "ibncaez", "text": "Doesn\u2019t seem like enough land to do any meaningful expansion. Parking, fire lane access, FAR etc", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ibmwf2g", "text": "Do you own research on it and make sure you're comfortable with all of the risk involved....if your Broker says its a \"great deal\", why aren't they buying it? \n\nDuring a recession or economic downturn, personally I am more comfortable with a multi tenant smaller industrial unit property (1,000 to 2,000 SF units) versus a larger 30,000+ SF single tenant property. I am in SoCal and even when the market was being crushed, there was always demand for the smaller units from either people downsizing out of larger spaces or smaller businesses wanting to get out of their garage.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iblv0xu", "text": "You should make the seller see if he can negotiate a longer lease term for starters", "replies": [{"id": "iblw6t4", "text": "Yes of course. That\u2019s not an option for them, and also why it is likely a 8 cap and hasn\u2019t been grabbed by the big players around me in this space yet.", "replies": [{"id": "ibmrhwb", "text": "It sounds like in your situation it all depends on the tenant how stable is and if he\u2019s stable he should be able to negotiate a longer-term lease with inflation in mind.\n\nIf this has been on the market you want to see the offers.\nComparable\u2019s\nAnd what happens when the tenant moves out do you have any money to retrofit.\nThat is a conversation you need to have with your banker also wear with that money come from.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ibml31i", "text": "Couple of broker notes:\n\nWith my industrial tenants half need a truckwell, but the most important thing to them is clear height. Anything below a 18' is a no go. \n\nIs there a yard?\n\nIs there room to potentially add a truckwell?\n\nIf you have access to costar I would try and look at the historical vacancies and average time vacant for comps. \n\nAs a side note, have you done a comparison on the owner user sale side? Typically the owner/user side of things right now is red hot even with the higher interest rates. \n\nGood Luck!", "replies": [{"id": "ibmojoi", "text": "Great notes. It helps to know approx 1/2 need a truck well. There is an ability to add one if I extend the back of the building into an \u201cL\u201d formation, which would make trick turn around easier. \n\nThis building is 18 foot clearance, plus a few large square cut outs the are 20+ ft (square areas around 20x20 sq feet probably for previous specialized equipment. \n\nThere is a yard with a fair amount of extra space. Total lot is 2.3 acres, building takes up approx 1/3rd total I believe. \n\nI do have the costar vacancy data. Median vacancy is 4 months, sample size of 8 recent comparable. \n\nI have not looked at owner user comparison. This seller is mandating a 2 year leaseback option, which is probably why owner user buyers haven\u2019t bid on it.", "replies": [{"id": "ibndai8", "text": "From not walking the building, it sounds like a solid property overall. I have a few buddies that specifically target these buildings with short term deals for investment. Thesis is they get a new group in their at a significantly higher lease rate or sell off to an owner user for an exit. Some of the owner user pricing I am seeing in my area is over $200/SF", "replies": [{"id": "ibnh3ia", "text": "Oh I like this! That\u2019s an excellent option to explore at the turn. I could list it for lease a few months before lease is up in 2 years, and if not getting interest flip to sale to owner user and roll into something else.", "replies": [{"id": "ibovlyu", "text": "The risk is the market tanks and the sale option is slow and painful, buuuut with how many groups have been trying to find stuff it is a calculated risk a lot of people are willing to take. The estimate I use often with my clients is: Is this at or below the replacement cost of the building as the long term historical values typically head to these prices?", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ibtl8rq", "text": "Work in multi and a lot of new construction deals in 2021 were trading at big numbers while still under construction with typical terms including serious hard money at psa and closing at final CO. Obviously these deals go to debt funds for financing, but is that the same on the industrial side? And are industrial buyers tying up spec deals on bridge loans with some form of cash management until they hit x debt yield?", "replies": [{"id": "ibtlzla", "text": "Going to the question, the thing that scares me the most about industrial is the inevitable recession will be the first supply-side recession we have seen. People need a car - but there isn\u2019t one to buy, etc. There has to be an inflection point where shit gets too expensive, cost of capital continues to increase (even more than 5.5% rates vs 3.0% cap rates), and demand slows down.", "replies": [{"id": "ibudx2z", "text": "This is my concern, I\u2019m trying to sort out the potential effects of the current macro economic factors and/or recession on the industrial space. I understand demand getting crushed (intentionally) by rates. Supply side is something that in theory could be a quick reversal (abrupt end of Ukraine conflict, reversal of covid policy in China). Optimist in me wants to believe economic cycles are shorter now, and policies change quickly to influence voters. Will tight financial conditions (high rates) persist, or are they already baked in? Maybe the CPI data release today will have more guidance \ud83e\udd37\u200d\u2642\ufe0f", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]