Bought a 1979 warehouse at $52/sf because it looked cheap, then sat empty 11 months

The clear height detail is what stops me. You knew it was 18 feet before you bought. At what point in your process did you find out what the actual local tenant demand needed? Was that a call you made after closing, or did you assume $52 a foot solved for it?

Your math already tells you the answer, so I'll put a frame on it that generalizes.

Vacant older industrial is a two variable problem: months of downtime and dollars per foot to make the building leasable. You solved for price and let the other two float. At 31,000 feet, every month vacant cost you roughly $11,900 in carry by your own numbers, and the $118,000 of work was another eight and a half months of stabilized NOI. Twelve months down plus that spend is about $260,000, which is $8.40 a foot. That's the number that should have come off your bid.

On the market context: industrial vacancy sat around 6.7 percent at the end of 2025 after supply briefly ran ahead of demand, and it's expected to peak around mid-2026 before tightening. Construction starts have fallen sharply, down roughly 63 percent since 2022 by one measure, and net absorption forecasts for 2026 point toward something like 220 million square feet on reshoring, manufacturing and data-center-adjacent demand. That's a constructive backdrop. It does not lift a 1979 building with 18 foot clear and no trailer parking, because tenant behavior in this cycle is a flight to quality. Modern, well located logistics space leases at rent. Commodity space leases at price and location.

Which means your outcome depended on one assumption: that the discount to replacement cost was compensation for physical obsolescence rather than a reflection of it. At $52 a foot against $130 new, you were paid about $78 a foot to accept a building that can't serve a racked distribution user. Your realized cost of curing what could be cured was $8.40. The uncurable part, clear height and the yard, is permanent, and it sets your tenant pool for as long as you own it.

For the next one, get two independent leasing opinions on rate and downtime in writing before you're hard on deposit.

Eleven months of writing checks with nothing coming in is exactly the thing I'm trying to avoid. I'd rather buy the 7.5 cap leased building and be bored.

The sprinkler quote at $196,000 caught my eye. On a 31,000 foot building that's over six dollars a foot, which sounds high to me unless the water service itself needed upsizing. Did the quote include a new fire pump or a tap upgrade? I ask because I've seen owners get one number, decide the whole path is closed, and never find out that most of the cost was one line item they could have negotiated with the tenant over.

The part I'd have fought about is the four months free on a five year lease. That's 6.7 percent of the term given away at the front, when you'd already been vacant eleven months and were the one under pressure. Was the free rent gross or net, and did you get a burn-off clause so it repays if they default in year two? On a first-generation tenant in an older building, unamortized concessions with no recapture language is where I've seen the real loss show up later, quite apart from the rate.

Your all-in of $1,861,000 against $167,400 is a 9.0. Take reserves at $0.20 a foot and it's an 8.6. Now underwrite the exit. A buyer looking at this in year four sees a single tenant fabricator, 18 foot clear, one year of term left, and prices it on a vacant basis with the same downtime you just lived through. So they'll bid something like $55 to $65 a foot, call it $1.9M, and your four years of cash flow is your whole return. That's a fine outcome, it's just a cash flow deal wearing an appreciation deal's clothes. Did you underwrite the resale on a vacant basis going in?

Genuine question from outside the deal side: who actually tells you what local tenants need at 18 foot clear? Is that a leasing broker who specializes in industrial, or do you get better information from the tenants themselves?

@plumb, industrial leasing brokers know it, and so do the local dock door and racking contractors, because they quote the buildouts. The trick is asking a broker who doesn't have the listing yet. Their answer changes once they want it.

I'd push back a little on the framing that this was a loss. You're at an 8.6 on a building you control, with a tenant who just spent money moving fabrication equipment in and won't move again for cheap. The mistake was the bid, not the asset. Overpaying by $300,000 hurts once. Buying something unleasable hurts every year.

@thicket, that's the distinction I'm writing down. On my list I've been sorting older industrial by clear height and yard depth and nothing else, and this thread says that's roughly the right two columns. Adding one for sprinkler type now.

Four months in the model when the first two prospects both needed something the building physically can't do. That's the whole story, and it happened before you ever listed it.

Curious what your lender did with an 11 month vacancy. Was this bought with a bridge or short-term loan sized on stabilized income, and did you have an interest reserve? Most vacant-building loans I've seen either require a reserve funded at close or start testing coverage on a date certain, and if that date hit at month nine you'd have been in technical default while still touring prospects. Ask about the test dates in writing before you sign, they vary a lot by lender.

34,000 square foot lot on a 31,000 foot building means the site coverage is basically wall to wall. There's no version of that building with trailer parking, ever, unless a neighbor sells you dirt. Worth knowing whether that's even possible before the next one.

I run small apartments and the parallel is exact. Vacancy cost is the thing beginners model at a percentage and experienced people model as a number of months times a specific dollar figure. Eleven times $11,900 is a sentence, 8 percent vacancy is a decoration.

@quarry, thanks for putting the carry number in. I've been stuck in analysis for a year and the thing I've been missing is that my downtime line was always a percentage. Changing it to months and dollars kills about half the deals on my sheet, which I suspect is the point.