Sydney Industrial Warehouse - Cant go wrong?

I have been told that you can't go wrong getting into the commercial investment space (particularly industrial warehouses) right now in Sydney as this offers the best mix of CG and yield in Sydney Metro area.

What are everyones thought on this sentiment? I have space to go for a small sized industrial warehouse between 1-1.5m. Is it true that you can't go wrong?

 

Have you considered downside risk?

Can you weather 12-18 months vacancies, 30% incentives, lower lvr & higher interest rates?

 

So what are the upsides?

 

The sun will rise tomorrow morning.

 

Haha
Assuming you can mitigate the risks of having a vacant property/having to make compromises to entice a tenant, does the aforementioned statement ring true?

 

If you can mitigate the downsides, you are left with the upside.

the devil is in the how……

 

Yes, even if it's cloudy.

 

Do you guys reckon there is much more upside in regards to growth?
Values have doubled in the last few years haven’t they?

 

This should ring alarm bells!

Who told you that? What guarantee are they offering?

 

Rents have increased but also caused by a lack of stock, vacancies are tight. Wait and see on the effect on business & consumer confidence with the outcome of the federal election.

They have according to the VG, just have a look at the latest land tax notices.

General Industrial increased 50%, light industrial only 20%.

 

Less than 10 years ago you could pick up a small industrial unit in Sydney south west and west for a song. Now you need a song and dance.

I reckon there’s money in these types of investments.

 

I have been told if they offer you brown paper bags of $$$ for the industrial warehouse.
Those are the best deal going around.
Sorry my bad - brown paper bags. I am so out of touch. They use the green woolworth reusable shopping bag.

 

I had 12 industrial units, when I sold all 12 had been let for the previous 12 months, after sale [2015] 12 remained let for another 12-18 months then the vacancy rate went down to 2-3 units which I consider normal and allowed for a good cash flow. Just for fun I watch the vacancy rate of those units and the new owner increased the rents and the vacancy rate has remained the same.
Not a fan of buying just 1 industrial unit, would want 2-3 small/medium units at least for cash flow.

 

People say lots of things and it changes every day.

Can they point you to specific examples of these "can't go wrong purchases"? I suggest you start here and familiarise yourself with the market: Commercial

$1-1.5M is what I would consider the bad end of Sydney CIP. Weak bargaining power as a landlord.

 

Ditto.... to many people believing the hype this sort of commercial is bullet proof.

Another downturn and it will get very interesting..... resi is not different either.

 

Everybody in Aus commercial property keeps referring to "yield compression" as it relates to commercial cap rates. This is history already but some agents keep referring it for new buyers entering market.

In the US, they have already been living in the "yield expansion" world for a few years and will become more so with fed rates forecast to rise sharply. RBA is going to turn rates up in June.

For the OP, it all comes down to making sure you have strong knowledge of true valuation of a property and not the hype.

 

What would be considered small or medium units? Is this by the general size of the property? Ie what would a 150m2 high clearance industrial warehouse in a business park complex be considered?

 

Thanks for the link, i will have a look through.
Is it considered the bad end purely because its so accessible to most investors? What do you think is the minimum entry level (ie property size/type, minimum cap rate for a particular property value etc) to get past this bad end range?

 

We had 52sq units which could be extended to 104sq m with a wall removed if wanted, they were not high clearance.

 

It will mostly be strata at that price range. Nothing wrong per se with strata in a good area but they tend to be much-of-a-muchness. The price range issue comes up cos tenants with successful businesses can easily afford to buy one themselves cos they’d rather not be beholden to a landlord. So vacancy can be an issue with strata.