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Warehouse Investment (But How?)

Commercial real estate is property used for commercial purposes, such as office buildings, shopping malls, hotels, hospital buildings, residences, factories and warehouses, and individuals or companies can invest in commercial real estate by building or purchasing it.

compared to other commercial real estate such as offices, shopping malls, hotels, residences, etc., the land cost and unit construction cost of warehouses are much lower; the shorter construction period of warehouses can lead to a much shorter period of expected post-investment income; warehouses can be leased for much longer periods of time and tenants do not change very often, which can lead to regular and predictable long-term rental income; warehouses can be much less affected by a deteriorating economy (e.g. in an inflationary environment it may be very important to hold stock if necessary, and even in an inflationary environment it may be easier to raise prices for warehouses than for housing or offices); warehouses can be easily and quickly converted into different business premises, e.g. factories, wholesales, outlets, etc., enabling investors to use warehouses for different purposes.

During the pandemic period, the importance of warehouses was much better understood and the demand for storage space for both conventional trade and e-commerce started to increase rapidly after the pandemic. “Logistics” facilities and warehouses are among the real estate properties with the highest investment expectations in the last 20 years, and the investments made for them are shown among the very right real estate investments in terms of their results. 1

Increasing demand for storage space due to the development of e-commerce, the preference for more near shoring production or supply in case a pandemic-like situation occurs again, and the need to hold more inventory; primary rental prices for storage space2 (e.g. primary rents increased by 89% in USD and 683% in TL between Q3 2020 and Q3 2023); the fact that investing in warehouses is much easier and generates income in a much shorter period of time; and the fact that investing in warehouses is becoming much more attractive in my opinion.

So How Should I Invest in a Warehouse?

I strongly recommend paying attention to the following elements in both the design and construction phases of warehouse investment (unfortunately, I see them missing or not properly done in many warehouse projects in the investment phase and in working warehouses). In this way, the expected gains and benefits from the warehouse investment can be achieved in a shorter period of time.

  • Warehouses are not only a place where goods are stored, but also a place where tens or hundreds of vehicles (trucks, vans) move every day. Therefore, warehouses should be suitable not only for the purpose of having “more” storage space (m2) but also for vehicle movement.
  • Warehouses should be suitable for convenient, safe, easy and comfortable working for all personnel, including disabled workers. This feature also facilitates the recruitment of personnel to work in particular.
  • The floors of the warehouses, including those with more than one storey, as well as the floors of the outdoor areas, must be of sufficient strength (ton/m2), not easily damaged (pits, cracks), not puddled.
  • Warehouses must be safe against fire hazards.
  • Warehouses must be safe against natural disasters, especially earthquakes.
  • Warehouses should support environmental protection and the fight against climate change. This could include, for example, saving electricity consumption, utilizing rainwater or wastewater, using “zero-emission” materials in the construction process, avoiding heat loss on ramps and roofs, making the most of daylight, and having solar panels on roofs.
  • Warehouses should be suitable for electric vehicles (trucks, vans, passenger cars).
  • Warehouses must be suitable for return and recall processes.
  • Warehouses, electricity and internet infrastructure must be able to meet future needs and jobs.
  • The tanks should enable easy commissioning of, for example, temperature-controlled rooms or special-purpose rooms.

If I had the authority, I would give the lands owned by the state (Municipalities, Ministry of Environment and Urbanization, Iller Bank, etc.) to logistics companies “free of charge” or rent them for a “long time” at “very low” prices on condition that they build warehouses (temperature controlled, normal, open) and I would regularly check the status of these warehouses (income, profit, efficiency, business volume).

  1. Emerging Trends in Real Estate – Europe, 2023, PwC and ULI (Urban Land Institute) ↩︎
  2. GYODER’s Indicator Reports ↩︎