In today’s market, there are 6 factors to consider when purchasing a factory.
In today’s market, locating an industrial property can be tough. Using a buyer checklist will help you avoid making hasty decisions you’ll regret. (industrial factory for sale)
It’s crucial to consider key criteria since factories with the right qualities can be successful. Sydney’s industrial sector has record low vacancy rates due to a scarcity of land, but buyers are undeterred.
Sydney industrial rents climbed faster than long-term norms in the year to May 2019, according to Savills. In the 12 months to March 2019, average prime industrial rents in south western Sydney grew 8.9%, while they rose 7.4% and 5.1% in South and Western Sydney, respectively.
Investor demand for industrial assets in Sydney was unusually strong during the same time period, with sales volumes significantly higher than the previous annual period.
Savills Research expects that ecommerce retailing, a growing domestic economy, and significant population growth will drive rental growth in Sydney’s industrial market. Industrial Sydney’s market continues to thrive across all major market indicators.
Lower stock levels in Melbourne, Australia’s largest industrial market, are expected to improve rental growth, according to Savills. Future investor demand will target “specialised assets, such as cold storage and fulfilment centres,” as Victoria’s population and food exports grow. Investment levels are at their lowest since 2013, following three to four years of record industrial investment activity.
In today’s challenging environment, there are various aspects to consider, ranging from practical to pricing:
1. Geographical location
Changing demographics, rezoning, and gentrification can quickly affect places. Matthew Lee, partner at Knight Frank and head of industrial NSW, warns investors against being pioneers. “Don’t invest in a distinctive neighbourhood to stand out.” Before investing, understand market drivers.
2. Leases and tenants
“Investigate the tenant’s viability, the term of the contract, and past rental history,” says Sydney’s Victor Kelly Estate Agents. Length of a lease affects a bank’s willingness to lend, while a tenant’s future success affects an owner’s investment plan.
3. Clearance inside
According to Mr. Lee of Knight Frank, this should be one of the top objectives for potential purchasers. “You would select the 500sqm factory with a 10m clearance over the identical sort of property down the road with a 6m clearance every time,” he argues.
4. Practicality
How easy is it to carry things in and out of the facility? Is the roller door tall enough, and is the driveway wide enough? This is especially relevant in markets where 3PL (third-party logistics) tenants account for a large percentage of the total. According to Savills, the transport and logistics sector dominated Melbourne lease activity in the last year, with ecommerce expansion boosting space demand (42 percent of total leasing activity in Melbourne in the 12 months to March 2019).
5. The ratio of office to warehouse
Mr Lee points out that industrial premises with an exceptionally high proportion of office to warehouse are difficult to sell and lease.
6. Is the pricing reasonable?
Extremely tight markets are pushing up rental costs, and residences are being promoted at outrageous rates, says Terry Saba of western Sydney business Bawdens. Mr Saba, who has nearly two decades of industrial property experience, says, “We make sure our clients pay the right fee per square metre and rent is set correctly.” Some commercial real estate agents will manipulate the market.
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