Investors find value in converted warehouses
Converted warehouses are changing the game for industrial investors. There's a continued investor demand for inner-city, re purposed warehouse space. Read more
Once the domain of tech start-ups and creative agencies, large corporates are increasingly looking for ‘funky’ spaces on the outskirts of cities.
Many are finding the answer in the most nontraditional of places – converted warehouses – and it’s changing the game for industrial investors, says JLL’s Head of Industrial in Australia, Michael Fenton.
As more corporates embrace new thinking around inspiring, smart, productive and fun environments, “savvy landlords are realising the potential locked up in these beautiful relics of Australia’s proud industrial heritage,” he says.
“The likelihood of premium rentals for re-positioned assets is a key attraction for property investors with extra value found in spaces that are unique and will allow the occupier to position itself ahead of its competitors.”
Fenton believes investor demand for inner-city, re purposed warehouse space will continue to grow for a variety of reasons, perhaps the most important being to capture value over the medium to long term. And, that the re-purposing of obsolete buildings is driven by an investor’s view of the depth of the end user market.
“Investors are predominantly attracted to an asset by its location and the potential for that asset to grow in value for reasons other than just an improving market. This can include future rezoning to a higher and better use, new infrastructure projects in the immediate vicinity or broader macro trends, such as decentralised office precincts and flexible work practices.”
Re-purposing buildings is also attractive to developers seeking a more immediate return than can be realised by more traditional development methods.
Fenton explains that time and cost are inter-related and the difference between a profit and a loss in any property development. “To reduce both through a re-positioning exercise, rather than to demolish and rebuild, will always be more preferable to an investor/developer – provided the underlying fundamentals of the asset are sound,” he says.
Hot spots for repurposed warehouse projects are present in most of Australia’s major capitals but Fenton says the top locations of focus are those near major commercial and population precincts with the benefit of future rezoning and infrastructure projects.
In Sydney that means Alexandria; in Melbourne, Richmond; in Brisbane it is Fortitude Valley and in Adelaide it is Kent Town.
Going forward, Fenton believes investors would be wise to also follow major corporate occupiers into the locales they are targeting, giving the example of CBA’s move into the Australian Technology Park in the Sydney fringe suburb of Eveleigh. In Melbourne, corporates are eyeing off space in Docklands and Collingwood, and in Brisbane, Fortitude Valley is under occupier scrutiny.