Red flags on industrial real estate?

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June 09, 2025

by an member in Corona, CA, USA

What are the key operational or financial red flags to look for when evaluating industrial real estate tied to a business acquisition (e.g., manufacturing or logistics firms)?
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Reply by an investor
from The University of Chicago in Louisville, KY, USA
Definitely find out early if there is any history of environmental issues or claims. A lot of buyers don't focus on this early enough and it can become a deal killer at a late stage after you have spent money on legal,DD, etc.
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Reply by a searcher
from Emory University in Tucson, AZ, USA
There are some good threads on this topic, and I've pulled a prior comment forward from a past post: Our real estate strategy begins by projecting short and long-term business needs and evaluating whether ownership facilitates or hinders growth. We also approach the property acquisition by considering the property as its own business. Our commercial broker conducts a comprehensive property assessment, analyzing market lease rates, build quality (leveraging their development/contracting expertise), occupancy rates, and potential re-use scenarios. This detailed evaluation informs our offer, which defines the property and business prices independently. While you should consult with your advisors, we also found it beneficial to clarify, specifically for the commercial property, the use of a standard purchase contract (e.g., a state realtor's association commercial form), disclosure speed for the property, and the timeline for phase multi-stage (environmental) inspections. We didn't want a property headache to arise when a significant investment had been made on the due diligence of the business.
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