Industrial Property Acquisition
Industrial has been the strongest performing commercial asset class in Australia for a decade, and South East Queensland has been the strongest industrial market in Australia. Population growth, the freight task, infrastructure investment and the structural loss of industrial land to residential rezoning have combined to produce a market where serviceable stock is genuinely scarce.
Scarcity is not a reason to buy. It is a reason to be precise. Industrial assets look interchangeable on a listing and are not, clearance, hardstand, slab loading, power supply, truck access and site cover determine which tenants can physically occupy the building, and therefore determine the depth of the leasing market at expiry.
The building either works for the tenant or it does not
Physical specification is the primary determinant of industrial leasing depth. A 7-metre internal clearance excludes modern racking. Inadequate hardstand excludes anything with B-double access. A slab rated for light use excludes most manufacturing and heavy storage.
We assess specification against the tenant pool that will exist at expiry, not the tenant in occupation today. The question is always: if this tenant left in three years, how many businesses could physically use this building, and what would they pay?
- Internal clearance, roof pitch and racking suitability
- Slab loading capacity and floor flatness
- Hardstand area, truck turning circles and B-double access
- Roller door count, height, and dock versus on-grade loading
- Three-phase power capacity, and upgrade cost if inadequate
- Office-to-warehouse ratio, excess office is a liability, not an asset
- Site cover: low site cover carries land value; high site cover carries risk
Land rate is the real underwriting
For industrial we underwrite twice: once on the income, once on the land. The land rate per square metre against recent serviced industrial land sales sets the downside. In constrained precincts the land alone has repeatedly supported values through income disruption.
Low site cover, 40% to 50% — means the investor is buying land with a building on it, with expansion capacity or future redevelopment optionality. High site cover means the investor is buying a building, and the building depreciates.
Rent reversion: the defining opportunity in SEQ industrial
Industrial rents in South East Queensland have moved faster than most leases have been able to reset. That produces two very different assets that look identical on a listing: one where passing rent sits well below market and market review or expiry delivers a step-change in income, and one where passing rent sits above market and the next negotiation is a reduction.
We benchmark passing rent per square metre against current effective market rent in the precinct, net of incentive, and model the reversion at each review and expiry date. Reversionary upside is the most reliably underpriced feature of the Queensland industrial market.
Precinct, access and the freight task
Location in industrial is about time to market, not amenity. We assess proximity and access to the Port of Brisbane, Brisbane Airport, the Gateway and Logan motorways, the Inland Rail alignment, and the labour catchment that can staff the site on shift.
Precinct also determines competing supply. A submarket with a large approved but unbuilt pipeline carries different re-letting risk to one with no remaining zoned land.
Environmental and contamination risk
Industrial sites carry environmental history. We check the Environmental Management Register and Contaminated Land Register, review previous uses, and where the history warrants it, commission Phase 1 and where necessary Phase 2 environmental assessment before the contract goes unconditional.
Remediation liability is not theoretical and it is rarely capped. It is the single largest uninsured risk in industrial acquisition and it is entirely avoidable with proper enquiry.
Owner-occupiers buying industrial premises
Business owners buying their own warehouse are solving two problems at once, occupancy cost certainty and balance sheet growth. The acquisition should be tested both as a property investment and as an operational decision.
Where the property is held in an SMSF or a separate holding entity and leased back to the operating business, the lease must be documented at market rent and on commercial terms, and the property must stand on its own investment merits in case the business changes.
Questions investors ask us.
- What yields are industrial assets trading at in Brisbane?
- Prime, well-located industrial with a strong covenant has traded firmly, with secondary and older stock at a meaningful discount. The more useful question is the yield relative to reversion, a tighter yield on a substantially under-rented asset can be better value than a higher yield on an over-rented one.
- Is a smaller industrial unit a good first commercial investment?
- Strata industrial units in the $700k to $1.5m range are one of the most accessible entry points into commercial property, with a deep tenant pool of trades and small businesses. Body corporate structure, sinking fund adequacy and car parking allocation need close review.
- How do you assess contamination risk?
- Searches of the Environmental Management Register and Contaminated Land Register, review of historical uses and aerial imagery, and independent environmental assessment where the history or the current use warrants it.
Request an investment strategy session.
A written brief, an independent view on the asset or the mandate, and a clear position on whether the capital should be deployed at all.