VIC Dandenong Warehouse/Office

Discussion in 'Property Analysis' started by kmrr, 8th Jan, 2020.

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  1. kmrr

    kmrr Well-Known Member

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    Hi All

    What are your thoughts on this 595sqm WH/Office?

    7 Damian Court, Dandenong, VIC 3175 - Industrial & Warehouse Property For Sale - realcommercial

    Pros: Size looks reasonable, Dandenong is considered more desirable now than it was some years ago, the court it is in is quite large, the rsd is high for large trucks, 3ph power.

    Cons: Listed Price (1.1m), Lease is short, Gross yield is 5.2% (not 5.7 as listed in advert), deep pump well.

    Not sure what to make of the rear easement but seems like a non issue?
     
  2. spludgey

    spludgey Well-Known Member

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    It's vacant position, how can you have a yield.
    Also, 5.2% seems pretty low (I have zero CIP experience).
     
  3. kmrr

    kmrr Well-Known Member

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    can confirm it is not vacant possession. lease until Feb 2021 despite the information presented in the advertisement.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    @kmrr - the easement, will have very little effect (at present) as the building has been built to take this into account. It's not shown on the photos so I assume that you have the S32.

    @spludgey - the advert notes that it is leased until Nov 21, so not VP. What's the go with the earlier vacate date - or is this at the tenant's option?

    What are vacancies like in Dandenong?

    How does the current rent compare to market? A quick look at the current available premises gives me the impression that the rent will drop substantially (though most of what is on offer is in Dandenong South).
     
  5. kmrr

    kmrr Well-Known Member

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    I've spoken to the agents and they've said Feb 2021 at earliest, most likely Nov 2021. The current tenant is building a purpose built facility elsewhere.

    Re vacancy rates I haven't been able to find any specific % for Dandenong however the general sentiment of articles and reports I've read all suggest that Melbourne industrial vacancy rates are at all time lows. What I can't be sure of is how relevant these numbers are as I feel like they are geared towards larger type industrial sites (big sheds/DCs) where as this is more suited to a smaller operation.

    Damian court is also in a superior area to the south dande ones for lease on realcommercial. I've been involved in developing/building some CIP in < 1km radius from most of those listed.
     
    Last edited: 8th Jan, 2020
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    There were only about a dozen odd properties in the 500-750m2 range but not sure how many buildings of this size are around the area. A drive around the area for familiarisation goes a long way to knowing what is available however there will always be the risk that the market turns in periods of low confidence or from low to high vacancies. This can also be affected by new supply coming onto the market.

    What is the lease expiry date? Is there a break clause to allow early vacating?
     
  7. kmrr

    kmrr Well-Known Member

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    I've re-read the s32 and they have signed a 2+2+2 starting from Nov 2015 which would take them to Nov 2021.

    I drove around the area at the end of last year and had a good walk around the dandenong precinct as well. I think i may have spotted less than a handful of vacancies amongst a few hundred properties in the area.
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Sounds OK on the occupancy front, how do you feel on taking a hit on the rent when it comes to a new lease?

    Have a chat with some of the other agents in the area to check current rental rates (how they compare, whether the flavour is nett or gross, lease up times, potential users of Ind 1 zoning - what does it allow?)
     
  9. kmrr

    kmrr Well-Known Member

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    its currently leasing for $97/sqm. From memory last year when i did the comparison rates for appx 80-85 however i deemed most available comparisons at the time to be inferior so i am confident the rate would not drop too much, market dependent of course.
     
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  10. willister

    willister Well-Known Member

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  11. kmrr

    kmrr Well-Known Member

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    I would say that Damian court building is superior. The WH space is similar size/quality but Bando doesn't appear to have office space of similar size/quality the Damian does. Damian also has a significantly better face value yield as well however it will need to be released in less than 24 months. I don't think there is too much difference in locations as both are are easy to access. Bando is about 8km closer to the city however. What are your thoughts?
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    Two seconds due diligence (Instant observations):
    BCA - exit door is blocked & not compliant with single handed operation
    Exit light over fire door requires replacing
    Currently has fluoros, there may be incentives to upgrade to LED high bays
    There's a party wall separating the two sides of the warehouse - are paths of travel etc compliant?
     
  13. kmrr

    kmrr Well-Known Member

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    These are more builders issues though and they cant really control what a tenant does if it's their own informal fit out. I can't say I know if they would have any repurcussions for the landlord however? Do they have any liability?
     
  14. Scott No Mates

    Scott No Mates Well-Known Member

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    Lessor approval for the works is usually required under the lease and definitely required when submitting a DA/CC.
     
  15. kmrr

    kmrr Well-Known Member

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    Something tells me this fit out was done informally, without drawings and a CC/RBS approval :eek:
     
  16. willister

    willister Well-Known Member

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    A few questions if I may to increase my own knowledge:

    1. Zoning is Industrial 1 - Are you legally allowed to have like the public walking in and shopping like they way I assume they operate?

    2. BCA and Exit lights - small issues that are easily rectified?

    3. There's a party wall separating the two sides of the warehouse - are paths of travel etc compliant? How did you work this out just by looking at the pictures, which picture is it? I can't see it just by looking at the pictures.

    4. If you a tenant was to change the structure of the warehouse, what wouldnt trigger a DA/CC? Adding/removing a wall or...?

    Thanks.
     
  17. The Y-man

    The Y-man Moderator Staff Member

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  18. willister

    willister Well-Known Member

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    Thanks, I would suppose to self answer my question:

    1. You would need a permit from council based on page 3 of the link: Section 2 Permit Required: "Retail premises (other than Shop and Take away food premises)"

    4. I'm still puzzled to this though?

    Under Building and works

    Permit requirement

    A permit is required to construct a building or construct or carry out works.

    This does not apply to:

    - A building or works which rearrange, alter or renew plant if the area or height of the plant is not increased.

    If I had a clearspan warehouse which I'd assume was the original form, and I wanted to add an office partition or rearrange by adding a few walls as such, which is what the ad sort of indicates, I wouldn't need a permit from council? Confused as why the above posters mention you'd need a DA/CC?

    Thanks.

    Judging by the ad itself I'd say the Damian Court one is larger in land size by the car parks at the front? Yep agree with the office space, but seems to me speaking from friends/agents who are in CIP one man's trash is another man's treasure. Some sites I've come across have large offices which is useless to say a mechanic type setting or where it's too large it's ample. It's all dependant on the usage, but I'd say the Damian Court one trumps it due to the flexibility in attracting a wider range of uses.

    Location wise, I seem to prefer the Springvale site, it is rather close by to the town centre which is buzzing with activity and it seems there are few vacancies just by driving around it. There appears to be a mix of light industry?
     
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