The COVID-19 pandemic, as widely reported, has impacted CBD Businesses and Landlords.
In contrast, industrial properties are less impacted by the pandemic compared with office or retail property.
YIELD ON INDUSTRIAL PROPERTIES
Before COVID-19, the industrial property sector was generally transacting an initial yield of 6.5% – 8 % depending on the particular asset. During Covid, the yield of industrial properties had dropped to between early 5% and mid 6%, as the popularity of this type of asset class soars.
PRIOR TO PURCHASE
From a legal standpoint and otherwise, here are some points to consider before purchasing an industrial property:
- Location –the most important thing is the location of the property. Whether a property can attract a substantial tenant depends on the location.
- Age of the building – if it is a new building, it will have a good depreciation schedule. This is handy for tax purposes and obviously less maintenance and repair. If it is old, you need to check the history of tenants occupying the building, which is a good indication for possible future tenancy.
- Current lease – carefully check terms and conditions of all the leases to prevent any surprises or potential risks relating to the tenancy.
- Tenant – people often focus only on the lease and miss the tenant itself. You need to examine the tenant, looking into the type and longevity of their business activity.
- Future potential – whether it has any extra space to expand the Net Lettable Area (NLA) or any potential development in the future.
Recently, the writer was mandated by a client to source a good income generating multi-million dollar industrial property. Tony Kim is part of the Stephens and Tozer Commercial and Property team who successfully sourced and managed the acquisition process including dealing with the Legal and Due Diligence components. The client was very pleased with services provided and has instructed Stephens and Tozer to find another property to add to his portfolio.
If you are interested in or considering investing in Industrial or other commercial properties, the writer would love to talk to you. Expert advice, satisfied clients, and another deal!!!
Where opinions are expressed these are of the author and does not reflect accounting or commercial advice of the firm.
5 March 2021