Industrial Property Investment
What are industrial properties?
Industrial properties are commercial real estate assets designed to support businesses involved in manufacturing, warehousing, logistics, distribution and other industrial operations. These properties include:
- Warehousing and distribution centres: Large spaces used for storing goods and handling logistics, often favoured by e-commerce companies like Amazon and retailers like Woolworths.
Manufacturing plants: Facilities designed for the production and assembly of goods. - Cold storage facilities: Specialised spaces with temperature controls, crucial for industries like food production and pharmaceuticals.
- Flex spaces: Hybrid properties that combine office functions with industrial capabilities, offering versatility for small businesses.
The industrial real estate market spans various sizes and scales, from small warehouses to massive logistics hubs near ports and urban centres.
Recent trends in
industrial properties
The industrial real estate sector has experienced unprecedented growth over the past decade, largely driven by technological advancements and shifts in consumer behaviour:
- The e-commerce boom: Online shopping has dramatically increased demand for logistics and warehousing facilities. Retail giants like Amazon, alongside smaller e-commerce players, are continuously expanding their logistics infrastructure, creating sustained demand for industrial properties.
- Resilient performance: During economic uncertainties, such as the COVID-19 pandemic, industrial properties outperformed many other asset classes due to their integral role in supply chains.
- Record-low vacancies: Vacancy rates for industrial properties remain at historic lows, particularly in major cities like Sydney and Melbourne, where well-located assets are in short supply.
- Increased capital investment: Institutional investors and REITs (real estate investment trusts) are allocating more capital to industrial properties, recognising their potential for growth and stable returns.
What is the future for
industrial properties?
As e-commerce continues to grow, efficient logistics networks have become a top priority for businesses. Consumers now expect faster delivery times, prompting companies to establish last-mile delivery hubs in urban centres. These smaller, strategically located facilities are becoming indispensable links in supply chains, ensuring goods can reach customers quickly and efficiently.
Beyond e-commerce, onshoring is increasing demand for manufacturing facilities. Recent global disruptions, such as COVID-19, have led many companies to bring production closer to home to reduce supply chain risks. This shift is boosting interest in industrial spaces that can support modern manufacturing needs.
Urbanisation and infrastructure projects are also reshaping the market. As Australia’s population grows, new transport projects like Sydney’s WestConnex and the Inland Rail are improving access and increasing the value of industrial properties located near these key routes.
Sustainability is another significant factor influencing industrial real estate. Investors are focusing on energy-efficient buildings with features like solar panels, water recycling systems and green certifications. Tenants are also looking for high-tech facilities that integrate automation, robotics and artificial intelligence to streamline operations.
Why buy an
industrial property?
Investing in industrial properties offers several advantages that set them apart from other commercial real estate options:
- Higher yields: Industrial properties often deliver rental yields between 6-8%, significantly higher than residential and retail investments.
- Long lease terms: Leases typically span 5-10 years, with many including fixed rental increases or CPI-linked reviews, providing predictable income.
- Recession-resilient demand: The need for industrial space persists even during economic downturns, as supply chains remain active.
- Diverse tenant base: Tenants range from logistics companies and manufacturers to data centre operators, spreading risk across industries.
But while industrial property investment is attractive, it’s not without risks. Zoning restrictions and compliance with environmental regulations can present challenges, especially for older properties. Additionally, properties in secondary locations may struggle to attract high-quality tenants or achieve competitive rental rates.
It’s important to conduct a thorough analysis of tenant quality, lease terms and property condition before purchasing.
Key factors to consider when
buying an industrial property
While industrial properties offer significant potential, careful due diligence is essential. Key factors to examine include:
- Location: Properties near major transport hubs, highways and ports are highly desirable. Urban proximity is also critical for last-mile logistics.
- Tenant quality: Long-term success hinges on securing reliable tenants. Assess the financial stability and track record of potential occupants.
- Building specifications: Features such as ceiling height, floor load capacity and accessibility can significantly impact the property’s appeal and functionality.
- Zoning and regulations: Ensure the property complies with local planning and zoning laws for industrial use.
- Market trends: Study vacancy rates, rental growth and supply pipelines in the area to gauge potential performance.
Why buy with
Costi Cohen?
Industrial property investments can be complex, with pitfalls for inexperienced buyers. Common challenges include overpaying, purchasing in a poor location or failing to account for zoning and compliance requirements. Without detailed market knowledge, it’s easy to overlook critical factors that influence an industrial property’s profitability.
As one of Australia’s leading commercial buyer’s agencies, Costi Cohen offers a proven track record in identifying high-performing industrial properties. Our expertise includes:
- Comprehensive market insights: We help you identify the best regions, industries and asset types to invest in.
- Tailored due diligence: From tenant evaluations to zoning compliance, we provide a detailed assessment of potential properties.
- Negotiation expertise: We help negotiate a favourable price and terms to maximise your investment’s value.
How to finance an
industrial property investment
Industrial property investment financing differs from residential loans, with lenders focusing heavily on the property’s potential to generate income.
Most lenders require a higher deposit for industrial assets, with maximum loan-to-value ratios (LVRs) typically ranging between 60-70%. Interest rates may also be slightly higher due to the perceived risk of commercial properties. However, long-term leases and strong tenant demand often make industrial investments attractive to lenders.
Working with a commercial finance broker can simplify the process and help you secure competitive rates and terms. They can assess your financial situation, identify suitable lenders and negotiate the best loan structure for your investment.
Explore some of our
Industrial Purchases
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Costi Cohen — Australia’s premier commercial real estate consultants
Whether you’re a seasoned investor or new to the market, our expertise will pave the way for your success in commercial real estate. We’ve looked after more than 250 commercial properties and are prepared to help you discover your next investment opportunity.
No matter your timeline, budget or preferred location, the expert team at Costi Cohen can help you find a commercial property that aligns with your needs. We invite you to get in touch with our team for a consultation today.
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