You must have witnessed ups and downs in the stock markets and the given situations, and you may also be worried that investing in stocks may be a risky affair. In such a situation investing in real estate becomes the safest option as it is a long-term investment and is also highly rewarding. While the residential property is becoming more and more concentrated in recent times, the industrial real estate sector’s assets proved to be more profitable. By investing in industrial real estate properties, you not only increase your cash flow and increase your returns, but you will also be able to pay off your loans earlier than that of residential property investment.
What is industrial real estate investment?
Industrial real estate can be classified as all the lands and buildings that accommodate different industrial activities such as production, manufacturing, assembly, warehousing, research storage, and distribution. Investing in Industrial real estate becomes beneficial as several retail giants and boutique retail are moving their products through the online medium, requiring warehouses to keep their products until their sale. Earlier, the industrial properties were re-modified or redeveloped as more attractive assets such as multifamily, retail and residential. Now, there is an increase in demand for industrial property outweighing the supply.
Why invest in Industrial property?
The investment in small to medium-sized industrial properties can also be cost-efficient compared to the retail, office, and multifamily setup, which makes it a lot easier. Industrial warehouses are often single-tenant properties offering long-term leases. This also implies that the investor will have less to deal with in managing his property in case of investing in industrial properties.
Industrial Investments in Chennai
Chennai is home to large-scale industrial development. It is a manufacturing hub for automobiles, chemicals, petrochemicals, food processing, and electronics. The state has a solid footing in software and IT services. Chennai has also started to attract investments in new sectors recently, referred to as the sunrise sectors. Chennai and the surrounding corridors have made Chennai the best choice for global companies. This has further led to them setting up their manufacturing plants in Chennai due to several advantages offered by the city, such as affordable pricing, optimal location, etc.
There has been an increase in the demand from various e-commerce companies for warehousing and storage facilities in Chennai. The need for warehouses increased during the pandemic as e-commerce companies are engaging in groceries and perishable goods. This has also led to the increase in the lease and rental activities in the state by 23-30% between June and September 2020. The rental cost of warehouses and storages in Chennai has also increased from Rs 20 per sq. feet to Rs 25 per sq. ft.
There have been several issues regarding land acquisition in Chennai due to the political battle over the economy. Several industries have also struggled to get land parcels for setting up their units in and around Chennai. This has led to the increased demand for industrial lands. The Mahindra Industrial Park in Maraimalai Nagar, located on a 1500 acre land area, is an example of the increased demand for industrial lands. The group has also planned a similar industrial park in North Chennai. Marg, a leading industrial company in India, is also developing a similar complex beyond Mahabalipuram.
The reports have shown an industrial demand of around 3,000 acres of land every year in Chennai. Due to the government’s inability to provide a large extent of land, the need for private industrial lands has also increased. The majority of industrial land demand has been from the heavy engineering, electronics, and automobile component manufacturing sectors. These demands also arise from MNCs from countries like Japan and the US for setting up their industries in India.
Chennai is one of the most prominent industrial hosts in India. It has a wide range of industries operating, such as automobiles, chemicals, petrochemicals, food processing, and electronics. This has led to the increase in demand for industrial properties. The pandemic has also seen an increased operation of the e-commerce sector. This has led to the increase in demand for warehousing and storage facilities which has also increased rental and lease value.
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Frequently Asked Questions on Industrial Property investment in Chennai
Yes, investing in industrial real estate is a good investment as there is an increase in demand for industrial lands and warehouses. The pandemic has also resulted in the growth of the e-commerce sector, offering a wide range of products. Thus, they have started to demand more and more warehousing facilities for their products, including dress materials, groceries, and perishable goods.
The value of the industrial property is calculated by estimating the property’s income by using the capitalization rate method. The capitalization rate, or commonly cap rate, is calculated by dividing the net operating income from the current market value or the property’s sales value.
Industrial real estate includes lands and buildings that can be utilized or is suited for industrial activities. Some of the leading industrial activities include production, manufacturing, assembly, warehousing, research, light storage, distribution, etc. Thus the demand for land to carry out any of these functions is considered the demand for industrial property.
Ambattur has been recognized as the fastest developing area in Chennai in terms of industrial development and residential development.