Industrial has been a star performer.. in what areas should you look?

As we all know, industrial property has been the star child of 2020 and 2021

Sydney industrial property in particular has been incredible, with freehold land values going up incredible amounts, in some cases 50% or more.

investors are accepting low net yields in metro Melbourne and Sydney.. with a few sites netting 4-5% of the purchase price.

Sydney in particular is unique, in that there is so little industrial land which can be used/released. This has driven prices through the roof.

it also helps that banks are now offering more favourable terms than they ever have historically for industrial purchases!

As someone who is bullish on the common warehouse, for the next 10 year outlook, I’m keen on accumulating these in a similar manner to how people build resi portfolios:

- Buy something in a good location that could use some work - A.K.A. Worst house in best street

- Purchase it and either do some works or find a tenant who will

- Make sure numbers work for every purchase, if cashflow is good, after some time get a deposit for the next and then rinse and repeat..

which areas would you be looking into? Sydney is a bit unaffordable unless you’re happy with strata units (larger component of the purchase is depreciating, and capital improvement outgoings are a pricier % component of ownership costs , more likely to be placed on LL than tenant)

I am considering QLD in particular, due to the sheer number of aussies moving up there and the limited land supply that isn’t in a flood zone. My thoughts were areas that service or are critical for the Sunshine Coast, Gold Coast, and of course, Brisbane city itself.

Tho in the back of my mind I don’t get too excited about qld.. the gains in Sydney and the certainty of tenants has kind of desensitised me, and I don’t think anywhere else will offer the buyer as much confidence. In any case... which areas should be considered?

 

Functionally obsolete factories offer good value (cheap) but.... be prepared to make it compliant - replace the asbestos roof, raise the walls to the maximum allowable under the DCP (increased volumetric letting space), add 4" topping to the floor or replace if cracked, get rid of a few columns if possible, upgrade switchboards/lighting to LED high bay & tart up the office and facilities (paint/carpet/plasterboard/ceilings/doors/kitchenette/toilets/comms etc).

It won't set you back millions but will improve the returns markedly for the next 20 years.

 

these would be common out St Mary’s way, wouldn’t they?

Not too familiar with where to look for these inter state tho

 

Yep, also closer to the city eg Marrickville, Matraville, Revesby/Bankstown Airport precinct etc 1960's buildings typically.

Suburbs like North Melbourne, East Melbourne, Footscray, Linky - Knight Frank Industrial report (refer to the map).

Linky - Colliers

 

I replaced the skylights in my wh and it made a hell of a difference!

 

I replaced the metal halide highbays with LED, massive govt subsidies (lights were free, labour was a nominal fee).

 

This was the first thing i looked into but the work had already been done! Definitely a good and cheap option when considering how to make outperforming improvements.

 

Thx to Scott No mates & others who are experienced with Industrial I am sure this is a tread which is useful to many on p.C I have no holdings in Industrials. Areas near Badgery's Creek Airport ( St Mary's ?) might be goers No doubt priced accordingly ?

 

Marrickville would be a dream, tho it would be fair to assume any freehold with a decent land component won’t go for a dollar under $2m, no matter the condition of the building

even revesby might not be far behind, I’ll be looking into those Melbourne suburbs tho

time to try and find something less competitive

 

I am looking at a deal currently in central coast. Very tight in industrial stock atm.


Regards