Warehouses, distribution centers, and last-mile logistics — the e-commerce backbone.
Industrial real estate is the property class covering warehouses, distribution centers, manufacturing facilities, and last-mile logistics buildings. Industrial is the second-largest CRE asset class by transaction volume — trailing only multifamily — and has been the strongest-performing major CRE sector since 2015 thanks to e-commerce-driven demand.
Industrial is broadly classified by use and configuration. Bulk distribution / big-box (200k+ sqft, 32–40' ceilings, dozens of dock doors) serves regional and national distribution. Light industrial / flex (50k–150k sqft, lower ceilings) serves smaller tenants needing light manufacturing or last-mile distribution. Last-mile logistics is the fastest-growing subcategory — smaller (30k–100k sqft) urban infill buildings serving same-day delivery from Amazon, FedEx, and similar.
E-commerce drove the boom in industrial from 2015 to 2022. Online shopping requires roughly 3× the warehouse space per dollar of sales as brick-and-mortar retail, because everything has to be stored, picked, packed, and shipped from somewhere. As Amazon scaled and other retailers followed, demand for modern industrial space exploded — rents grew 5–8% annually for most of the decade and cap rates compressed sharply.
The asset class has structural advantages. Most industrial is NNN-leased to credit tenants, with operating expense ratios of 5–15% (vs. 30–50% for multifamily). Tenants are sticky — distribution networks aren't easily relocated, so renewal rates are high. Buildings are simple — fewer mechanical systems, no in-unit appliances, minimal capex per square foot. The combination produces highly predictable income.
Underwriting industrial requires attention to building specifications. Clear ceiling height drives rentability — modern logistics tenants need 32–40' ceilings; older 24–28' buildings are functionally obsolete for many uses. Dock door count and configuration matters for distribution. Trailer parking and truck court depth drive whether large tenants can operate efficiently. A great location with the wrong building specs can be a value-add story or a value-trap.
| Property: 285,000 sqft modern distribution | |
| Lease: 10-year NNN to logistics tenant, 7 yrs remaining | |
| Base rent / sqft / year | $8.25 |
| Annual base rent | $2,351,250 |
| Operating expense reimbursements (NNN) | +$580,000 |
| – Operating expenses passed through | ($580,000) |
| – Landlord-paid (mgmt, structural reserve) | ($95,000) |
| NOI | $2,256,250 |
| Cap rate | 5.85% |
| Property value | $38,569,000 |
Class A modern logistics in primary markets trades at 5–6.5%. Light industrial and flex at 6.5–8%. Older or functionally obsolete buildings can trade above 9% — usually as value-add or redevelopment plays.
Warehouse is a subset of industrial. "Industrial" covers warehouse, distribution, manufacturing, flex, and R&D. Modern usage often treats "industrial" and "warehouse" interchangeably for distribution-focused buildings.
Smaller industrial buildings (30k–100k sqft) located in urban or near-urban submarkets to support same-day or next-day delivery. Demand surged with the growth of online grocery, prescription delivery, and same-day e-commerce.
E-commerce growth drove explosive demand for warehouse space. As demand outpaced new supply, rents grew rapidly and cap rates compressed as institutional capital chased the sector. The compression slowed in 2023–2024 as rates rose and supply caught up.
Clear ceiling height (32'+ for modern logistics), dock door count and configuration, truck court depth, trailer parking, column spacing, and floor load. The wrong specs can make an otherwise well-located building functionally obsolete.
Matrix structures bridge, value-add, and stabilized debt on industrial properties — from small-balance flex to mid-market logistics buildings.
