Medical vs Warehouse

I am looking at 2 similarly priced properties at the moment. One is a warehouse (1000sqm) and the other is a medical centre (200sqm). Both are in Melbourne's South East middle ring which good access. The leases are 4+2 and 5+5.

The WH space is appx 12 yo with an asking price that would give a low 5%yield. The medical space 2-3 yo with an asking price that would give a high 5% yield.

Much has been said about the industrial space being somewhat 'insulated' from the coming recession but how do people feel about small medical practice spaces? I have experience purchasing warehouses and work in this space however I have not purchased a medical practice before. What considerations are there when looking at what could make it a good investment beyond the numbers? this particular space appears to be part of a larger commercial space.

I am open to investing in either asset but would like to hear what the community here think.

 

Is the medical centre a strata suite? (refer to all of the other threads on commercial strata issues).

Is the vendor in either deal the occupants or related to the vendor? This may inflate the purchase price by reflecting a better yield.

 

We have 2 commercial properties and one is a warehouse and the other is a medical centre.
Similar relative proportions to the original post.

I’ve always preferred warehouse/industrial due to the flexibility it offers, also with a specific outlook to product handling and distribution for online business future growth.
During the recent issues, the medical centre has surprisingly performed badly and have even asked for rental relief.
On the other hand, the warehouse has increased sales by at least 5x regular trading, which was very good to start with.

 

@Ace in the Hole - ironic how in a medical/health crisis, it's been the medicos with their hand in your pocket.

In our instance, it's been the construction industry related tenants who have put up their hands (other tenants in food wholesale haven't skipped a beat even though they service distinct markets retailers & restaurant trade).

 

They can ask, but we’re still seeking evidence and they are still paying full rent, so hopefully they’ll drop the request.
If not, it will be a 6 month rent reduction deferral to be ammortised for the remainder of the lease.

A lot of tenants are just having a go with no evidence.
Also had 2 resi requests, one dropped the request and the other likely to.

 

I've brought forward an incentive for one. The other is a long term tenant so I don't have an issue (bit of ammo for lease renewal).

 

Any particular threads you can point to where we can read up on commercial strata issues please?

How to do a check if the vendor and the occupants are related parties? Especially if they have different surnames and/or are different nationalities, eg. John Smith is the sole property vendor, but is married to Xiao Chan who's not on the title and we have no idea is John's wife. Her mother Mei Chan is the tenant (John Smith's mother in law) therefore have no idea the tenant is related to the vendor.

 

What type of financial evidence are you asking from your tenants? Have they offered to pay full rent until they provide evidence or have you had to take the hard line telling them until they provide evidence then full rent is payable as usual?

I'm surprised that medical centres & related medical businesses aren't thriving in these times. Thought they wouldn't have been affected at all.

 

Unit factory's in a strata complex

 

would you go see a doctor or dentist right now unless it was an emergency? Non essential surgery or treatments? Gp dont want to see ordinary patients either. Dentists are cancelling regular non emergency checkups from their end.

 

The irony is that cbd offices, with the highest rent, lose out the most because the cbd is empty at the moment. Even with relaxed rules the suburban doctors offices would do better.

cbd services are expensive because of the rent, but convenient. If people are working even half the time from home, then suburban medical services will still get more business.

 

Drop in patients quite noticeable at my medical centre, 3 months ago had to wait up to 10 days before I could see my GP, now I can see her within 24 hours and can even TALK to her the same day, wonder how long that's going to last ...

Would still choose the medical centre as long as the location was right ...

 

Looked at other threads on commercial strata issues but still unclear - is the downside if you own one strata commercial property in a block of other ones, or if you own a block of strata properties?

 

@Stvn - A strata commercial suite is a white bread product ie no differentiation between what's on offer each suite is pretty much the same as the next or the corresponding suite above or below.

There is no overall or cohesive strategy or direction for the tenancy mix - it's each owner for themselves when it comes to leasing so you can end up with several competing tenants rather than complementary mix.

 

I only had this problem once when I owned several industrial units, would be tenants usually suss out who else is renting in the same complex and avoid competing.

 

Off topic, but the medical practice (bulk bill mind you) near our place...decent doctors but here today gone tomorrow. They were there for 2 years and were out in a jiffy when the leases didn't work out.

 

is 5% still a good yield in todays environment ?

i think it is very low...

thoughts ?