Pillar · Industrial
Industrial & Warehouse Underwriting
How to underwrite small-bay industrial, single-tenant NNN, and industrial outdoor storage (IOS) the honest way — true cap rate vs the broker cap, tenant rent coverage, and rent per acre. The guides, calculators, and definitions that matter, in one place.
Start here: the three industrial plays
Most non-institutional industrial deals fall into one of three shapes, and each is won or lost on a different number. Single-tenant NNN deals live and die on the tenant's rent coverage and on the gap between the broker cap and the true (post-cost) cap. Sale-leasebacks add a layer: the rent is set by negotiation, not the market, so you underwrite the tenant's credit and the rent-to-EBITDAR coverage before the real estate. Industrial outdoor storage (IOS) — covered-land plays on yard — is priced on rent per acre, not per square foot, and the cheap-improvements profile makes the land yield the whole story.
The honest-math trap
"NNN" rarely means zero landlord cost, and a headline cap rate almost never reflects what you keep. Insurance, management, a tax reassessment-gap, and sensible reserves all sit between the broker's NOI and yours. The worked examples below show exactly how much the headline moves once you net those out — the single most important adjustment in industrial underwriting.
A manufacturer sells its facility and leases it back on a 10-year NNN. The headline cap rate looks market — the coverage is where you actually underwrite it.
The 7.0% cap looks fine. But coverage of 1.40x sits below the institutional comfort floor of 1.5x–2.0x — the rent is rich relative to what the business earns. And with 3% escalators against flat EBITDAR, it erodes over the term:
| Year | NNN rent | Coverage |
|---|---|---|
| 1 | $700,000 | 1.40x |
| 5 | $787,856 | 1.24x |
| 10 | $913,341 | 1.07x |
By Year 10 the tenant earns barely more than its rent. The discipline: cap rate priced the deal; coverage underwrote it. A coverage-aware buyer either retrades to a rent the business can sustainably carry, or holds the rent and demands a corporate guaranty, deposit, and financial-reporting covenant to offset the erosion. Read the full sale-leaseback rent-coverage guide, and check the rent-coverage definition.
How are these numbers computed? See how UpsideIQ underwrites →
Free calculators
IOS Land Yield Calculator
Rent per acre, land yield, and value at a target cap — built for covered-land plays.
Open the calculator → CalculatorNNN Lease Analyzer
Triple-net rent, broker vs true cap, and rent coverage for single-tenant deals.
Open the calculator → CalculatorCap Rate Calculator
See the broker cap and the true (post-reserves) cap side by side — the gap sellers don't show you.
Open the calculator →Guides & teardowns
How Clear Height Drives Warehouse Value
See how clear height warehouse value works — taller clear height commands higher rent per square foot and can add over $1.5M of value on the same footprint, with a worked example.
Read → comparisonGross Lease vs. Triple Net (NNN)
Gross lease vs triple net NNN explained — who pays operating expenses determines landlord NOI, which is why face rents are not comparable across lease types.
Read → asset-playbookSingle-Tenant Credit Analysis for NNN Deals
Single-tenant credit analysis NNN deals hinges on tenant quality — investment-grade vs non-rated tenants can swing value by $2.5M on identical rent, shown with a worked example.
Read → asset-playbookHow to Build a Warehouse (Industrial) Pro Forma
Build a warehouse industrial pro forma the right way — base rent, NNN expense reimbursement, and landlord NOI walked through with a 100,000 sf worked example.
Read → iosIndustrial Outdoor Storage (IOS): The Investor's Guide
What industrial outdoor storage is, why investors want it, and how to source, value, and underwrite IOS deals — rent per acre, land yield, zoning, and covered-land plays, from working operators.
Read → TeardownThe IOS Yard Where the Broker Yield Falls Apart
An IOS yard at an attractive broker yield that drops once you adjust for usable acres, landlord carry, and month-to-month income — how true land yield really pencils.
Read → TeardownThe NNN Cap Rate That's Hiding the Risk
A single-tenant NNN building at a 7% cap that's really a bet on one non-credit tenant renewing a short, above-market lease — how to price the lease risk the cap rate hides.
Read → TeardownHow I Underwrote a $10.8M Industrial Sale-Leaseback — and Why Rent Coverage, Not the 7% Cap, Nearly Killed It
A working investor's teardown of a 7% cap industrial sale-leaseback — why the headline cap looked clean and how tenant rent coverage exposed the real risk.
Read → TeardownHow I Underwrote an IOS Yard — and Why Rent-Per-Acre and Zoning, Not the Cap Rate, Made the Call
A practitioner's teardown of an IOS land deal — why cap rate misframes a land asset and how rent-per-acre, land yield, and zoning reveal the real value.
Read → iosHow to Underwrite an IOS Deal (Industrial Outdoor Storage)
A complete guide to underwriting industrial outdoor storage (IOS) — land-based rent per acre, broker vs true cap, covered-land optionality, and a worked example.
Read → asset-playbookHow to Underwrite a Small Industrial Deal
A practical small-industrial underwriting playbook — single vs multi-tenant, NNN vs modified-gross, clear height, rollover and dark-period risk, broker vs true cap.
Read →Key terms
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