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Chapter 22

Chapter 22 Industrial Property, Office Building and Shopping Center Analysis Investing in Industrial Buildings Industrial buildings have the advantages of reliable, credit-worthy tenants, long-term leases, and opportunities to shift many operating expenses to tenants

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Chapter 22

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  1. Chapter 22 Industrial Property, Office Building and Shopping Center Analysis

  2. Investing in Industrial Buildings • Industrial buildings have the advantages of reliable, credit-worthy tenants, long-term leases, and opportunities to shift many operating expenses to tenants • Business operators, short on capital, prefer to channel resources into business expansion rather than real estate ownership

  3. Demand for Industrial Space • Largely a function of demand for products produced by industrial sector • Periodic shifts in demand for industrial space of various types and in different locations reflect alterations in composition of the industrial sector • Growth in service and technology • Decrease for products of heavy industry

  4. Locations Factors • Near fuel or power supply • Near markets • Footlose Industries

  5. Types of Industrial Buildings • No official classification system for industrial buildings. Can be characterized by nature of building’s construction or type of tenant it attracts: • Heavy industrial buildings • Loft buildings • Modern one-story structures • Incubator Buildings

  6. Investing in Office Buildings • Dramatic growth in service sector has increased demand • Demand for office space is a derived demand –related to demand for services supplied by occupants of office buildings • Unlike owner-owned office buildings, investor-owned buildings tend to be more functional and less luxurious • Multi-year leases • Options to renew on occupied space

  7. Investing in Shopping Centers • Investors and developers have long provided favorable lease terms to anchor tenants—major stores that attract customers • Recently, developers have allowed major tenants to construct their own buildings on sites leased from owners

  8. Lease Arrangement in Shopping Centers • Owners set base rental rate and increase rental rates as tenant’s sales volume increases (percentage clause) • Large shopping center tenants typically lease space on net basis, paying all expenses associated with operation of their space; smaller tenants often pay own utility expenses • Shopping center tenants often pay common area maintenance fee

  9. Types of Shopping Centers • Neighborhood shopping centers • Community shopping centers • Regional shopping malls • Super regional shopping malls • Lifestyle centers

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