Properties and Leases · REITs

Warehouses and data centers support different parts of the economy. Both require attention to location, customer demand, infrastructure and the capital needed to remain competitive.

Industrial property serves a physical network

A warehouse has value because it connects inventory with customers, transport and labor. Inspect access, building specifications and competing supply. National demand statistics cannot reveal whether a particular location is becoming crowded with new buildings. Separate leased space from space generating rent and check when development projects enter the comparison.

Rental growth needs a bridge to cash

A landlord may have older leases below current market rents. That creates a potential opportunity as leases expire, but the opportunity depends on tenants renewing, market rents holding and the cost of releasing space. Do not apply the entire gap to all leases immediately. Match the assumptions to the expiry schedule.

Data centers require more than buildings

Power capacity, cooling, network connections and equipment resilience are central to data center operations. A signed customer agreement can still require substantial construction and power delivery before revenue begins. Review capital commitments, utilization, customer concentration and who pays electricity costs. Rapid demand growth can coexist with expensive expansion and execution risk.

Test a development yield

Imagine a completed project with total cost of $200 million and stabilized annual NOI of $14 million. The simplified yield on cost is 7%. If cost increases to $230 million without higher NOI, the yield falls to about 6.09%. That is a property level measure before corporate expenses, financing and the time spent waiting for stabilization.

Try it yourself

A project costs $100 million and is expected to produce $6 million of stabilized NOI. If costs rise 20% and NOI is unchanged, what happens to yield on cost?

Show the worked answer

It falls from 6% to 5%, calculated as $6 million divided by $120 million. Delays would also affect the timing and present value of the return.

Further reading

Educational material, not a recommendation to transact. All numerical examples are hypothetical and exclude costs unless stated. Actual terms, eligibility, tax treatment and broker procedures depend on the security and jurisdiction.

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