There’s a new driver of investor activity and residential demand, and it’s not proximity to transport or beach access, according to a property valuation expert.
“Industrial lifestyle” precincts have flipped the property game on its head, according to Chris McKillop, a commercial director at Herron Todd White.
“Historically, being near industrial property was an absolute no-go for residents with claims of noise, smell, and heavy-use activity being a turn-off,” he said. But all that has rapidly changed.
He sees industrial precincts being embraced as never before by residents, with flow-on benefits for the value of the area’s property in all sectors.
“Lifestyle industrial sees sheds moving away from their traditional use for businesses like smash repair shops, spray painters and steel fabricators, and toward more resident-friendly operations such as microbreweries, high-quality restaurants, cafes, hairdressers, and florists. Some have even become live music venues fronting retail clothing outlets, gyms and sporting venues,” McKillop explained.
Home owners seeking space and attracted by the emergence of these lifestyle options soon follow suit.
“We’re seeing home owners buy these sheds so they can own a decent sized living area and huge additional space for, say, $800,000 in a location where houses cost around $1 million.”
And it hasn’t taken long for investors to seize on this opportunity, finding good asset potential in the commercial or residential prospects of these areas.
“There’s definitely more investors starting to creep into the space now,” Mr McKillop observed.
“They can buy these investments for sub-$500,000, and they’ll get a five per cent net rental return because the tenant typically pays all the outgoings,” he said.
But McKillop noted that not every industrial park has this potential.
He said there are a few factors needed to make industrial areas successful as lifestyle precincts, and even then, legal and practical concerns can make these purchases slightly more complicated.
“Normally, these sorts of projects evolve from established, older industrial precincts close to appealing population centres,” he said, which means that proximity to traditional cultural hubs is still part of the equation.
“Areas where there’s already good quality housing nearby, or in close proximity to CBDs, do well as industrial lifestyle hubs,” he noted.
Anyone considering buying in these areas needs to do their due diligence, according to Mr McKillop. For those wanting to buy an industrial space to use for residential purposes, he said to check the area’s zoning to ensure the block is not near heavy industry users and confirm that potential live-work spaces allow the “caretaker’s unit” to be used for habitation and not simply as an office space.
And he cautioned investors to seek out properties with a good tenant already in place if possible.
“If you are speculating by buying a vacant lifestyle industrial property, get advice on tenant demand in your area. Having an untenanted commercial property of any sort is risky at the best of times.”