At Phoenix Industrial Redevelopment (PIR), we’ve long believed that industrial real estate is one of the most compelling asset classes for investors seeking stable, recession-resistant returns. As the U.S. economy navigates a period of heightened uncertainty and volatility, we think it’s more important than ever for accredited investors to understand the unique characteristics of industrial properties that can help protect and grow their wealth through challenging times.
In this article, we’ll share our perspective on why industrial real estate has historically performed well during economic downturns and how our Equity Partners Program (EPP) is designed to capitalize on the specific opportunities we see in the multi-tenant industrial space. Whether you’re a seasoned real estate investor or new to the asset class, we believe the current environment presents a compelling case for considering an allocation to industrial properties as part of a diversified investment portfolio.
The Resilience of Industrial Real Estate
To understand why industrial real estate can be a valuable addition to an investment portfolio during times of economic stress, it’s helpful to first examine the unique characteristics of the asset class. Unlike other types of commercial real estate, such as office or retail properties, industrial properties are primarily used for the production, storage, and distribution of physical goods. This means that demand for industrial space is largely driven by the underlying strength of the economy and the need for companies to manufacture and move products to market.
During economic downturns, consumer spending and business investment typically decline, which can lead to reduced demand for certain types of commercial real estate. Office properties, for example, may see rising vacancies as companies downsize or go out of business. Retail properties may struggle as consumers cut back on discretionary spending and shift their purchases online. But industrial properties tend to be more insulated from these trends, as the need for goods and services remains relatively constant even in tough times.
In fact, past recessions have shown that industrial real estate can actually benefit from certain economic conditions that emerge during downturns. For example, as companies look to cut costs and streamline operations, they may seek to consolidate their supply chains and move production closer to their end markets. This can lead to increased demand for industrial properties in key logistics hubs and transportation corridors. Similarly, as consumers shift their spending towards essential goods and online purchases, demand for warehouse and distribution space may increase to support the growth of e-commerce.
Another factor that contributes to the resilience of industrial real estate is the relatively low capital expenditure requirements compared to other property types. Industrial buildings are typically simple, utilitarian structures that don’t require the same level of ongoing maintenance and upgrades as office or retail properties. This means that industrial landlords can often maintain steady cash flows even in challenging economic environments, as tenants are more likely to renew their leases and continue paying rent.
The PIR Approach
At PIR, we’ve carefully crafted our investment strategy to capitalize on the unique strengths of industrial real estate while mitigating potential risks. Our focus is on acquiring and repositioning multi-tenant industrial properties in the 20,000 to 100,000 square foot range in select markets across the U.S. We believe these properties offer a compelling mix of stability and growth potential, particularly in the current economic environment.
One key aspect of our strategy is our focus on properties that cater to small and midsize businesses. These tenants, which typically occupy spaces ranging from 1,000 to 5,000 square feet, are often the most resilient during economic downturns. They tend to be nimble and adaptable, with the ability to quickly pivot their operations in response to changing market conditions. They also tend to have strong ties to their local communities, which can provide a level of stability and loyalty that larger tenants may lack.
By acquiring properties that are well-suited to the needs of these small and midsize tenants, we believe we can create a more diversified and stable tenant base that can weather economic storms. We look for properties with a range of space options that can accommodate the evolving needs of our tenants over time. We also prioritize properties in markets with strong economic fundamentals and diverse industry bases, which can provide additional insulation from sector-specific downturns.
Another key element of our strategy is our value-add approach to asset management. We don’t just acquire properties and hope for the best – we actively work to enhance the value of our assets through targeted capital improvements and hands-on property management. This could include upgrading building systems, improving site layout and accessibility, and adding modern amenities that can attract and retain high-quality tenants. By creating spaces that are tailored to the unique needs of our tenants, we believe we can drive long-term cash flow and appreciation even in challenging economic environments.
The EPP Opportunity
For accredited investors seeking to capitalize on the recession-resistant characteristics of industrial real estate, our Equity Partners Program (EPP) offers a unique investment opportunity. Through the EPP, investors can participate directly in the ownership of multi-tenant industrial properties hand-selected by our experienced team of real estate professionals.
As an EPP investor, you’ll have the opportunity to earn passive income through regular cash distributions, and benefit from appreciation as our properties increase in value over time. You’ll also benefit from the expertise of our team, which has a proven track record of creating value through the acquisition, repositioning, and management of industrial real estate assets.
But the EPP isn’t just about financial returns – it’s also an opportunity to support the growth and resilience of small and midsize businesses in communities across the country. These businesses are the backbone of the U.S. economy, and they play a vital role in driving innovation, creating jobs, and supporting local communities.
Looking Ahead
As we look ahead to the future of the U.S. economy, we believe the case for investing in industrial real estate remains strong. While no investment is completely immune to economic downturns, the unique characteristics of industrial properties make them a compelling choice for investors seeking stable, recession-resistant returns.
At PIR, we remain committed to our focus on small-bay multi-tenant industrial properties that cater to the needs of small and midsize businesses. We believe this strategy is well-suited to the current economic environment and offers the potential for attractive risk-adjusted returns over the long term.
If you’re an accredited investor looking to diversify your portfolio and gain exposure to the opportunities we see in the industrial real estate market, we encourage you to learn more about our Equity Partners Program™. With a proven track record, a differentiated investment approach, and a commitment to creating value for our investors and our communities, we believe PIR is well-positioned to navigate the challenges and opportunities ahead.
