Red Flags for Industrial Real Estate Property

Article by Adam Geiger, Associate Broker in Voit’s Ontario office

Even if an industrial property appears to be in good shape, it is important to remember that looks can be deceiving. Before you make any sort of investment, take the time to carefully inspect the building. This list of red flags is not all-inclusive, but you can use these seven signs to help evaluate the general condition of a property before you get serious and sign on the dotted line.

Signs of Neglect

The first thing that should signal a red flag are signs of neglected building maintenance. Issues such as cracked asphalt in the parking lot, unkempt landscaping, stained ceiling tiles and faded paint may seem like no big deal, but they are signs that the property was potentially neglected, which could lead to larger problems in the near future.

But sometimes it’s not so easy to detect neglect if cosmetic upgrades have been made for the sole, sneaky purpose of keeping them hidden. Be on your A-game when looking around and don’t be afraid to ask the question if you’re having doubt. Is the new carpeting suspiciously hiding water damage? Is the “fresh” paint covering mold? A well-cared-for property will have had the air filters changed monthly, roof inspected for leaks, caulked doors, and windows.

Water Damage

A lot of issues circle back around to water damage, so you really want to get your Sherlock on when it comes to checking for potential problems on the property. Water damage is a nasty beast that can damage the foundation, cause mold growth, and lead to expensive repairs. Water damage may not reveal itself as an obvious patch of discoloration on the ceiling, or a steady drip falling into a bucket. You want to know how to identify signs of damage and be confident that water is draining away from the building, and not into its lower levels.

Foundation Issues

In most buildings, you find some small, hairline cracks in the walls. This is just the house settling into its position, so it’s normal. But large gaps signal a much bigger issue. If there are visible cracks above window frames, the doors stick, and the floors are uneven, well, these problems are probably stacked on some foundation issues. This could include unsupportive soil or shifting earth below the property’s foundation.

Roof Condition

If you think roofs are expensive for a home, roof replacement on an industrial property has the potential to be out-of-this-world expensive in comparison. Ask the seller the age of the roof, inspect the drainage systems, and, if you decide to move forward, get a formal inspection. If the seller got the inspection done before the property was placed on the market, ask to renew it. The roof is a big ticket item and a burden to replace. Don’t take chances.

Improper ventilation

Without adequate interior ventilation, moisture sticks around, which can create mold and increase allergies. Look for condensation on windows and slightly bubbled or peeling paint around windows, doors, or vents. This indicates moisture is hanging heavy in the air, walls, or ceiling drywall.

Possible Environmental Issues

While floods, tornadoes and earthquakes are things you might consider, environmental issues don’t concern only the occasional natural disaster. There is always the potential for hazards to be present and it’s important to know which ones to look for. Groundwater contamination, radon gas, waste disposal sites, and even busy streets are all issues that also offer a degree of concern.

Auto Access

This may seem really obvious, but it’s an important point to make because you won’t believe how many buildings are actually incredibly inaccessible. In industrial spaces, it is almost always necessary to access the facility via truck, be it to move equipment, send out a major delivery, or receive goods. This will be on top of employee or client parking, so consider square footage of the blacktop/concrete apron!

Leave no stone un-turned. If any of these problems are present and undetected initially, you will, unfortunately, have to discover them at some point. Being attentive means you’re not wasting your time on a building that might not be right for you. And if you do find red flags, they might not break the deal. Keep in mind that no building is perfect and all property, regardless of its limitations, can be a good value if it’s priced properly. While these seven tips will help you uncover potential issues, we always like to recommend a formal building inspection during due diligence. Better safe than sorry when making a sizable investment!

Adam Geiger | Senior Associate Broker
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