Tips on selling your industrial property

12/14/2017 (Updated 06/06/2018) By


When you decide to sell your industrial property, it is extremely important to list it with a commercial real estate agent that specializes in selling industrial properties. Industrial properties include auto repair facilities, warehouses, factories, and any type of property used for manufacturing, storage or research and development.


Many agents that sell industrial property only handle this type of commercial real estate. This is because there are many unique issues that apply only to industrial real estate. After reading this article, you will know why!


An important thing to think about before you sell your industrial property is that a new owner may want to use it for an entirely different purpose. Times are changing- the internet, technology and even people’s housing preferences have had a profound effect on these types of properties.


The experienced Industrial Property specialist we will refer to you will consider all of the following in their evaluation of pricing and marketability:

  • The Rent Roll
  • Comparable property values
  • Going market-rents for comparable properties
  • Location & access
  • Floor plan
  • Services that are accessible to the property
  • Overall condition of the property
  • Any specialized function or modification to the property
  • Environmental issues


The Rent Roll


If the building is currently leased, the agent will want to examine the payment history, lease term, tenant concessions, and whether the tenant or the owner pays for utilities and maintenance. This is especially important on an industrial property because usually the tenant is responsible for all of the utilities and maintenance of the property.


A strong tenant under a long term lease can definitely add value to the property. On the other hand, if you have a poorly written lease and under market rent- the buyer may not want to be stuck purchasing an under performing property.


An agent will also conduct market research of comparable buildings to determine what an industrial property like yours would rent for on the open market today. An agent will do this regardless of whether the property is currently leased or vacant. The amount of rent that the building can command is the most important factor in determining an industrial property’s value. 


Making a rent roll is the first step in determining the true value of the property. You can read more about putting together a rent roll here.


Location & Access


Easy access to freeways, trains, or other shipping routes are very desirable not only for manufacturing but also warehousing and distribution. In fact, many large internet companies and smaller entrepreneurs are using facilities all over the country to distribute their online orders. Close proximity to shipping routes can add significant value to your property.


An auto repair facility or mechanic’s garage would also benefit from being close to freeways or on a major boulevard.


Also consider truck access & parking

  • Is it easy for large trucks to access the property?
  • Are there loading docks to easily move cargo into the trucks?
  • Are their overhead doors on the side of the building so vehicles can enter the building directly?
  • How is the parking?
  • Is there parking INSIDE the building?- Many companies such as plumbers, cable companies etc. like to park their vehicles inside for security and maintenance.


These factors all affect the potential use and thus value of the property.


In some cases, your property may even be desirable as a home! In many urban areas such as Los Angeles, San Francisco, New York City and Detroit, people are paying top dollar to convert charming old factories into lofts.


Floor Plan


Besides square footage, there are other important things to consider. Ceiling height is very valued today as users can stack their goods higher and make more efficient use of space. The focus being on cubic volume not square footage.


Column placement can also have an effect on value as wide spacing makes it easier for forklifts to move about large buildings. A building with a “clear span” has no columns and can be highly prized.


It is also important to note the percentage of office space in the building. While 10 percent is typical, it can be as high as 50 percent for Research and Development buildings.




The electrical capacity and Internet capability are all important to consider. Many industries are extremely reliant on high amperage electricity being available.


Many industrial buildings are now being used exclusively to house computer servers. Easy access to Fiber optic, ISDN or T1/T3 data lines can be crucial. This can be a great use for a building that is in a remote or rural area not close to major shipping routes.


Overall Condition of the Property


It is important to be honest with your agent and any potential buyers about anything that you know might be wrong with the property.


You want to be sure you are setting yourself up for a smooth sale and try to avoid any problems in escrow that you could have avoided by full disclosure.


Specialized Function


The building may have large refrigeration units, HVAC, floor drains, hydraulic car lifts, or any number of other features suited to a specific type of tenant. Discuss these with your broker as well. However, some of these specialized features such as floor drains can lead to environmental issues. Which brings us to the biggie:


Industrial Real Estate Environmental Issues


Unfortunately this can be a very big deal when it comes time to sell your property. Industrial properties have the potential to cause environmental hazards which can affect not only the building itself but potentially the soil and even ground water beneath it.


Former use of the building by users who may have disposed chemicals down drains or directly onto the property itself can pose many legal issues beyond just the sale of the property. In fact, the building across the street may have been the source of the contamination but you may be responsible for the clean up!


In the litigious world we live in today, no financial institution will finance an industrial property without first having the current owner pay for an environmental report. The reason for this is that under current law- not only is the owner responsible for cleanup but so is the lender should they foreclose on the property. This makes it a risky proposition for the lender as the cleanup can cost more than the value of the property held as collateral for the loan.


An environmental report is broken down into Phase I, Phase II, and Phase III inspections.


Phase I inspections


Phase I inspections are generally paid for entirely by you, the current owner. You may do this at the time of listing or wait until it is requested by the buyer’s lender. Some banks will only accept reports conducted by specific companies they have approved. Talk to your agent to find out what they feel is the best way to handle it.


Phase I inspections will generally examine the history of the site, it’s prior uses, current local regulations and any state or federal files relating to the property. The site can be cleared at this point or recommended for a Phase II inspection. You can read more about the standard practice for environmental site assessments here.


Phase II inspections


Phase II inspections will be more in depth. Soil samples will likely be ordered and groundwater tested. The level of contamination (if any) will be assessed and courses of action to remediate the problems will be suggested. The cost of this phase is usually split between the owner and the buyer however everything is always negotiable.


Phase III inspections


Phase III inspections can be extremely costly. You will have to devise a plan to either clean the property up or perhaps do nothing. At this point, you may have a problem selling the property at all. It all depends on the planned future use of the site. If the property is to be turned into housing it will need a much higher standard of clean up then if it were to be a parking lot. Let’s hope you don’t get to this point!


Is a 1031 Exchange Right for you?


The current tax code provides for something called a 1031 Exchange which allows you to not pay capital gains taxes at the time of sale on your proceeds from the sale of your industrial or manufacturing property when you buy another investment property.


This is also called a Tax Deferred Exchange because although you don’t pay taxes at the time of sale, you may in the future if you decide to “cash out” of your investment partially or all together.


A great feature of a 1031 exchange is that you don’t have to buy another industrial building, you can buy just about any kind of income producing property or even multiple properties. For instance, you could buy an apartment, multiple rental homes, or a farm!


You can learn more about 1031 Exchanges here


Kozeee! will refer you to a qualified & experienced agent to sell your industrial property


As you can see, it takes unique skills and specialized knowledge to sell an industrial building.


Beyond just knowing the ins and outs of Industrial properties, a good agent will also be able to promote the property and excite potential buyers through the use of great marketing. They will also be able to negotiate on your behalf and walk you through the complex paperwork that is involved in the transaction.


Click here to be referred to a licensed, qualified and experienced commercial real estate agent to sell your industrial property anywhere in the USA