In a market defined by higher rates, tighter credit, and shifting demand patterns, smart owners of industrial and commercial real estate are rethinking capital allocation. One increasingly effective play is simple in concept but powerful in practice: sell a single, non-core or fully valued asset to acquire two stronger, better-aligned properties. Done right, this move can upgrade income quality, reduce concentration risk, and position a portfolio for the next cycle.
Sharpening the investment thesis
Owners looking to sell an investment need to first assess it for diagnostic purposes. This should include a comparison of the asset’s current performance with respect to its original acquisition thesis: location, durability of tenants attached to the asset, functionality of the building, and length of lease terms.
Oftentimes, the property that will be sold is the one that has become too “heavy” on capex expenditures and has a rollover occurring in the next few years, or has been outplaced into a submarket that is becoming obsolete for distribution purposes.
Selling the property frees up “trapped equity” (equity tied up in a property that has an overabundance of capital improvements) into cash (dry powder).
The objective is to invest that cash into two new properties that will work more synergistically together: in other words, if the seller were to split the proceeds from the sale of the property into a last-mile industrial condo with strong demand from tenants and a small bay flex property in a densely populated area, there would be complementary cash flows from both properties, which creates more options for how they are leased/occupied during different leasing cycles.
Partner with Agora and invest smartly.
Risk diversification, cash flow fortification
The shift in concentration of properties from 1 to 2 allows for greater diversification and resilience for an owner. When there is exposure to only 1 tenant and market, a vacancy or unplanned capital expenditure on one of those properties can significantly impact cash flow; however, having 2 properties allows for cushion in distributions.
Also, pairing properties with different lease maturity terms can allow an owner to achieve balance between growth and stability, e.g., 1 long-term credit tenant and 1 short-term “mark-to-market”.
Additionally, by owning multiple properties, an owner will have greater flexibility when it comes to raising debt. Lenders are generally more comfortable with smaller transactions because it gives them confidence in the property’s cash flow model. The smaller loans can therefore align with the individual property business plan and provide for staggered maturities. In a volatile interest rate environment, having this option is considered alpha.
You can also read: How to spot underpriced industrial properties before they hit the market
Operational upside and exit optionality
Industrial and commercial real estate reward operational excellence. Target assets where you can add value: clear-height upgrades, dock door additions, submetering, yard improvements, or ESG-forward retrofits that lower operating expenses. Focus on properties with functional obsolescence you can cure within 12–24 months.
Owning two assets also creates exit optionality. You can sell one stabilized property to recycle capital while continuing to compound value in the other. Or package both into a small portfolio sale to attract institutions seeking immediate scale. Optionality compresses hold risk and supports better IRR outcomes.
Execution checklist
- Underwrite conservative rent growth and realistic downtime.
- Stress-test debt service at higher rates and model interest caps.
- Tier your lease expirations to avoid clustering.
- Lock third-party reports early to maintain speed-to-close.
- Preserve cash reserves for near-term capex and tenant improvements.
In short, trading one for two (when guided by a precise thesis and disciplined execution) can transform a portfolio from adequate to antifragile. For smart owners, it’s not just a trade; it’s a strategic reset.
If you found our article useful, please share it with others and don’t forget to follow us on Facebook, Instagram and LinkedIn as well as check out our services at agorare.com