Has anyone had any thoughts about factories and warehouses? We currently own a couple of small industrial units with net yields of about 4%. I am thinking that it might be a strategy to buy an older complex of, say, 10 – 12 units and then improve their street appeal and if necessary strata title them, ready to sell off individually.
So the question is, has anyone had experience in this area and, of course, had any issues worth taking note of?Sounds interesting. Are you looking at regional or metro? I’ve never done this but have keen interest as I think there are good value add options with industrial.
I’m Gold Coast, so I guess that’s kind of regional albeit so close to Brisbane it’s sort of a satellite city. Yes, I see this as an opportunity to value add especially as there are plenty of older units around, built in the ’70’s and ’80’s, that have not been touched since. The inevitable problem is trying to find a whole group coming up for sale and them still being on the old titling system. I have seen it but that was a couple of years ago at which time I was committed elsewhere.
It can be very profitable to do cosmetic/modernisation of commercials and flipping in the medium term – the margins are usually greatest in the retail/office market than industrial.
Strataing the units may increase the profit margin, but you’ll find smaller strata units will generally sit there quite a while and potentially have to discount significantly to get a sale – factor that into your margins.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thanks Corey. I am heading toward leasing with an option to sell and our agent seems to think that the smaller (100sqm) style of industrial units are more marketable in this area, either as lease options or flipped. It does depend on the economic environment however and my impression is that the current environment on the Gold Coast has scope to grow over the next couple of years. After 2018 (Commonwealth Games) I’m not sure.
@mcpatching – there’s always lots of hype for what Commonwealth Games or the Olympics bring to a city. How long did it take for the area around the last Brisbane games take to get off the ground?
Whereabouts is the bew games being held specifically?
Homebush precinct for commercial still hasn’t hit its straps 16 years on and it is well located on one of the most toxic bays in the world.
4% net on existing industrial is pretty crook (very high value compared to rents – is the land prime for redevelopment or rezoning?
Buying older industrial for redevelopment can be worthwhile but be wary of functionality of the space – modern warehousing requires high roof, container access etc to maximise utility. Eg SW Sydney rents are 10-20% lower for older buildings as the volume of space is smaller compared with new buildings.
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Scott No Mates.
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