From Office to Industrial: The Cash Cow Shift

Ethan is a Baltimore-area investor who moved from offices and strip centers into strictly industrial after years of high capex and constant turnover in those assets. His 30,000 sf small-bay warehouse bought in 2013 for $2.15M has run nearly full for 12 years, needed little capex, and is now worth about $4.5M. Limited new supply of small bay, 3 percent annual rent bumps, and sticky tenants made it a cash cow. He sees big funds drifting down-market from big box to chase yield, but notes small-bay tenants are gritty and practical, so local owners who know the profile often have an edge.

He has doubled down on industrial outdoor storage. A 16-acre site near Dover was bought for about $1.2M, improved with gravel, fencing, solar lights, cameras and an app-controlled gate, then run by a truck-parking operator. Pricing is about $175 per spot per month with daily and weekly options, modeled for roughly 180 stalls and now about 65 percent occupied, already covering the mortgage. He financed quickly via a line of credit then plans to refi after stabilization. A failed Phase I led to a clean Phase II, which unlocked the deal. He also owns two 5,000 sf warehouses with 1.5 acre yards leased to a pipe distributor, a contractor and a granite company, plus another IOS site across from Dover being turned into containerized self-storage. Strategy wise he avoids Baltimore City’s higher taxes, favors Harford County and secondary markets near highways on the I-95 corridor, and targets IOS parcels of 3 to 5 acres or more where supply is scarce and demand is deep.

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