Where is the Brisbane industrial market heading?
Industrial premises now seem to be selling for negative cashflow prices. The capital growth has exceeded the rent rises. Where once you could buy a leased property with a 9% yeild and pay 7% interest on the money it now seems to be the other way around.
I have been looking around and some properties have advertised yeilds as low as 6%, do the people who buy them make them pay or do they just wait for the rent to creep up to make them cashflow +ve.
The reason I ask is that I have traditionally invested in Industrial and as far as I can see either rents on the whole need to lift dramatically or values need to drop.
I am considering selling one of my properties to buy a bigger one but just can’t seem to see value or +ve returns in any of them.
I’m with you on this one. The yields that are being asked for are simply ridiculous. There are so many more things in the universe of investments which will give better yields, yet industrial property continues yields continue to slip. I bought one property 5 years ago at 10% yield. At the time I planned to buy one every couple of years and build up a portfolio of them. But since 2003-4 the yields have been uneconomic. I’ve talked to several people about this and everyone agrees.
It could be that the yield was historically high, and now it is just moving to the other end of the band, and is historically low. Perhaps the long term average yield for industrial property is 7%?? The days of 10% industrials have gone the way of 10% residential properties.
However that’s not to say the properties aren’t ‘out there’, I personally know of one industrial property recently purchased at over 10%. The previous property owner had fallen out with the tenant and just wanted out. The business was being sold at the same time as the premises and there was no lease in place. The new business owner quite happily signed a lease at market rates which resulted in the yield of 10.5%.
But I do know of another which was well advertised in the paper and after contacting the agent (late in the afternoon, I might add) I was told of 5 other written offers on his desk, all above the advertised price in the paper. The advertised yield was 7%, so I’m guessing someone bought it for somewhere near 5%.
It’s worth checking out some of the listed property trusts from time to time, particularly after a sharemarket correction. Sometimes you can pick up decent LPT shares for very good yields. It’s best to sort out the ‘good ones’ before hand, and know what price you will buy, and then just wait. You’ll even get 50-70% LVR on some of them from a margin lender. Not as good as 80% LVR on a quality industrial property returning 10%, but better than sticking it into 5% industrial or 2.5% residential.
_____________________________
We all need somewhere to live – but do we all need a CBD apartment?Thanks brc. I am glad I am not the only one. Where would you go to learn about property funds to start off with?
My confusion is mostly due to the fact that a property I purchased last year is coming vacant soon. It will lease for $38000net pa or will sell for abou $650000. If I keep it in two or so years I will be getting a 10% return net on purchase price. However in the current market putting a tenant in on market rent rates actually de-values the property by about 17%.
Advise anyone?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
