1. Managing Industrial Real Estate
Topic 10
Abdul Jalil Omar
Department of Real Estate Management
Faculty of Technology Management and Business

2. Lecture outline Defining Industrial Real Estate
Nature of the Industrial Real Estate
The industrial real estate, market analysis and planning policy
Marketing industrial space
Maintenance of industrial property

3. Introduction
Industrial real estate was once the backbone of any developing economy
It is a source of economic prosperity and the key towards modernization
Industrial growth led to a rapid surge in industrial property development which transformed and dominated the built environment of cities.
Manufacturing was usually the initial magnet of urban growth, drawing in capital, labour and expertise from the surrounding regions and stimulating new economic activities and services.

4. Defining industrial real estate
Includes land and buildings used or suited for used by industry (Kyle, 2000)
It includes all activities involved in the production, storage and distribution of tangible goods as opposed to intangible services.
It refers to the transformation of raw materials or components into finished products and extends to packing, warehousing, distributing and transporting these finished products

5. Nature of industrial real estate

6. Classification by use of site
General-purpose building
Used for storage or adapted for light manufacturing or assembly plants
Special-purpose building
Single-purpose industrial properties: a steel mill.

7. General purpose building

8. Special purpose building

9. Boeing Assembly facility

10. Proton City, Tanjung Malim

11. Investor’s risk
Non-liquidity of the property increases the owner’s investment risks, and this leads the owner to place more demands on the tenant

12. Sale leaseback
Many corporations prefer to invest their capital in their own business operations rather than in real estate.
So, they look for investors who want to put their money into property with a guaranteed long-term lease.
The corporation will then sell the chosen site to the investor and execute a long term lease
This is called a sale-leaseback agreement – the corporation gets back its capital investment so that the funds can be reinvested in the business

13. Functional obsolescence
Technology change – leads to functional obsolescence
The high cost of moving heavy machinery and maintaining large inventories
Selection of a suitable site is critical

14. Plane graveyard, “The Boneyard”, 2,600 acres, 4,200 retired aircraft, Tucson , Arizona, USA- What to do with these plane?

15. The industrial real estate market
Industrial classification by location preference
Market-oriented industries
To be located near points of distribution
Resource-oriented industries
To be located near to sources of raw materials/supplies
Labour-oriented industries

16. The industrial real estate, market analysis and planning policy

17. The Industrial real estate market
Physical and functional obsolescence of old industrial properties is one of major problem faced by PMs (Bruce, 1995).
Many modern cities have an abundant stock of disused factory and warehouse buildings.

18. Market and property analysis
Site selection criteria
In a highly competitive market, the location with the lowest transportation and production costs may not be profitable.
Profit may be determined by:
The location of competitors
The importance of the customer proximity
The extent of the market area and the responsiveness of product demand to price changes

19. Required local market information
PMs should analyse the local market
Market survey should look into:
availability, price and source of utilities and fuel, financial stability, services and attitude of the local government.
Transportation consideration
Labour cost relatives to good highway systems
Plant size and features
Shipping and receiving facilities
Advantages of multiple tenancies

20. Land-use patterns Industrial parks Corridor development
Allow tenant to combine office, manufacturing and storage space in one-storey building
Corridor development
Results from a growth of two large industrial by interstate highway of other major traffice artery

21. Industrialisation and industrial restructuring
Industrial restructuring has led to functional and physical obsolescence of old industrial properties.
PMs are facing a formidable task in transforming these properties to meet the operational requirements of modern industries
Industrial real estate demand is certainly tied to the industrial process
It also led to the demand for new accommodation requirements and functional obsolescence of many existing industrial real estate.

22. Industrialisation and industrial restructuring
Three major changes in the industrial process:
Relocation of labour-intensive production
Shift towards automation
More capital-intensive, high value added production activities within the local manufacturing sector
Growth of industrial support services

23. Factory environment

25. Industrial Real Estate Development and new requirements
Many industrial buildings in old urban areas have become increasingly redundant, obsolete and operationally inefficient due to the changing nature of local industrial operations
It is a legacy of planning policy.
Provision of serviced industrial land has been the central theme in the government’s overall approach to industry

26. Marketing industrial space

27. Industrial advertising and promotion
Specialised industrial brokers
Rely highly on outside leasing agents to market or locate properties
The PM and broker must be in common of technical knowledge about properties and about industries tat may be good prospects for them

28. Tenant qualification Land employment densities
Building employment density
Structural density
Transportation access
Financial capability

29. Environmental Issues Industrial wastes – site remedial
Air and water pollution
Socially impact on industrial activities

30. Lease Negotiations Landlord and Tenant relationship The related Acts
Lease Agreement
Class Activity
In pair, read and discuss the ‘Net Industrial Lease’ in page (Kyle 2000) to understand the industrial lease.

31. Property Taxation and selling price of industrial real estate

32. Property taxation and industrial real estate prices
Gross rent psf depends upon many features of the property itself:
its location
the time period and
the quantity and quality of public services provided by local authorities

33. SUMMARY Industrial property is a customised property
Industrial moves along with the technology. Changes happen as a result of technology
Technical know how is important for managing industrial property.