What is the difference between distribution and flex industrial?
Distribution warehouses are large-format (typically 100K+ SF), high-clear-height (28+ ft), dock-loaded buildings designed for bulk storage and high-throughput logistics. Flex (or light industrial) is smaller-format (10K–100K SF) with mixed office/warehouse build-out, often multi-tenant, with a mix of dock and grade-level loading. Distribution serves regional or national logistics; flex serves local businesses, light manufacturing, and R&D. Different lender boxes, different cap rates, different underwriting.
Why has industrial been the strongest CRE sector?
Three structural drivers since 2020: (1) e-commerce share of retail sales doubled, requiring 3× more warehouse space per dollar of sales than brick-and-mortar; (2) supply-chain reshoring after pandemic disruption added domestic manufacturing and distribution demand; (3) last-mile delivery economics required smaller distribution facilities closer to population centers, creating a new sub-asset-class. Combined, rents rose 30–50% in many markets through 2024 and lender appetite stayed aggressive even as other CRE sectors weakened.
Can I do owner-user industrial with conventional financing?
Yes, but at 75% LTV maximum and recourse to the operating business and principals. SBA 504 lets you get to 90% LTV with the same borrower, plus a 25-year fixed-rate SBA debenture portion that prices well below conventional. For owner-user purchases or refinances, run the SBA 504 quote alongside conventional — SBA wins on most files.
How does cold storage financing differ from regular industrial?
Cold storage requires specialty lender knowledge. The construction is more expensive (2–4× standard warehouse cost per SF), the operations are more complex (refrigeration plant maintenance, redundant power, IIAR safety compliance), and the asset is harder to re-tenant if the original operator leaves. Lender pool is smaller. Pricing premium over ambient distribution is 25–75 bps. Underwriting weighs operator credit heavily; many cold-storage deals are owner-operator with the operating company guaranteeing.
What is "clear height" and why does it matter?
Clear height is the unobstructed vertical space inside a warehouse from finished floor to the lowest hanging structural element (joists, beams, sprinklers). Modern distribution wants 32+ ft clear height to support multi-level racking systems and AS/RS automation. Older Class-B distribution often has 22–28 ft clear, which limits which tenants can use the space efficiently. Clear height directly drives effective rent per SF — modern Class-A 36 ft clear commands 30–50% premiums over Class-B 22 ft.
How long does an industrial loan take to close?
Bank: 30–60 days. CMBS: 60–90 days. Life co: 60–120 days (slowest but tightest pricing). SBA 504: 60–90 days. Owner-user purchases that need SBA take longer because of SBA approval and CDC processing. Plan accordingly — third-party reports (appraisal, environmental Phase I, property condition assessment) drive timeline more than lender approval on most files.
Are environmental concerns a bigger issue on industrial?
Yes — industrial properties have a higher likelihood of historical environmental issues (hazardous-materials use, soil contamination, underground storage tanks) than other CRE asset classes. Phase I environmental site assessment is mandatory on any industrial loan; Phase II soil/groundwater testing is common when Phase I flags concerns. Properties with documented contamination often require environmental insurance or escrow holdbacks. Sponsors should plan 30–60 day environmental review and budget $2,500–$10,000 for Phase I, $10K–$50K+ for Phase II if needed.
Is there a minimum loan size for industrial?
For agency-quality financing (CMBS, life co, large-bank balance-sheet), $3M–$5M is the practical floor. Below that, community banks and SBA 504 are the right channels. We size every deal across all available channels — sometimes a $1.5M owner-user industrial gets cleaner economics on SBA 504 than on a community bank loan, and sometimes a $4M flex investment gets better terms on a small-balance CMBS issuer than on a regional bank.