What Industrial Deals Will Institutional Lenders Take?

Industrial is quickly becoming a pillar asset class for institutional lenders, which are more and more frequently looking to diversify into the commercial real estate segment. MetroGroup, in fact, says that these lenders are interested in deals across the spectrum, including small box buildings and manufacturing spaces. The firm recently secured $21 million in acquisition funding for a 103,000-square-foot industrial property in Sorrento Mesa. While typically lenders are concerned about small-box or single-tenant properties, there was healthy lender interest in this deal. We sat down with Patrick Ward, founder and president of the MetroGroup, to talk about the lender appetite for these deals.

GlobeSt.com: Industrial, in general, has become a popular asset class for lenders in the last few years. What is lender demand like for small-box industrial properties?

Patrick Ward: Institutional lenders have always viewed industrial properties as security for mortgage loans as a preferred asset class. Several of the life insurance companies that we represent classify industrial property loans as their best performing assets. They prefer industrial over office and retail properties. Smaller industrial properties carry the same preferences. Multitenant industrial properties, in particular, are desirable due the staggered lease expirations of the tenants. Single tenant industrial buildings are also desirable, however, they tend to face a bit more scrutiny in concern to lease expiration, functionality, and suitability to quickly re-lease in the event the existing tenant does not renew the lease.