Industrial Lending
What Is Industrial Building Lending?
Lenders offer industrial building loans to cover spaces like warehouses, logistics centers, and manufacturing facilities. The funding can go toward an acquisition, new construction, refinancing, or major improvements, depending on what the property needs.
Key Factors Lenders Consider
- Property type and use is considered. Warehouses, distribution centers, cold storage, and flex spaces all carry different levels of risk.
- Location and market conditions. Lenders prefer and favor areas with higher demand, low vacancy rates, and solid lease agreements.
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Loan metrics:
- Lenders usually want you to keep at least 25% equity in the property.
- Your property’s income should cover loan payments with a comfortable cushion, typically about 25% more than the loan requires.
- Quality of the tenant. Long-term tenants with strong credit, such as large national companies, can help secure better loan terms.
- Borrower creditworthiness. Lenders look closely at financial strength and experience in industrial real estate.
Types of Financing
- Acquisition loans based on the income and stability of the property’s tenants.
- Construction loans that require detailed budgets and schedules, carrying higher risk if market conditions change.
- Refinancing to improve terms or pull equity from existing industrial properties.
- Value-add loans used for renovations that increase property value and rental income.
Current Trends
- Market stabilization, with rent growth slowing and vacancies holding steady around 6%.
- AI and proptech adoption, improving operations and site selection.
- Reshoring of manufacturing, creating stronger demand for industrial space in the U.S.
- High demand for cold storage and industrial outdoor storage, driven by e-commerce and food delivery needs.