Article updated 1 September 2021.
Buying your first commercial industrial property needn’t be a daunting experience. You just need to have some basic knowledge and overcome the myths surrounding commercial property.
If you’ve never purchased a commercial property before, you’ve probably heard the rumours about buying an industrial space. Do any of these ring a bell?
- Commercial and industrial property is too expensive for the average buyer.
- Buying an industrial space is too risky.
- You need to be an expert to choose a commercial industrial property.
These rumours originate from people who are not familiar with the market or have made a bad investment. As with any real estate transaction, you need to do your homework first, but buying commercial industrial property can be a profitable venture. This checklist will help you make a more informed decision:
What’s your budget?
Commercial industrial property can be surprisingly affordable. In Adelaide, prices for smaller buildings start at around $200,000 and go up to about $600,000. In Sydney, expect to pay twice as much. Wherever you’re looking, explore the commercial property market first and find properties that are within your budget.
Where should you buy?
Location is of paramount importance for any real estate purchase. With the flight from inner cities to the suburbs and outlying areas, you might be tempted to look outside the inner city. However, a small inner city factory might be a great bargain and you could possibly convert the building into a commercial or residential property if the need arises.
What are the zoning laws?
One reason why industry is leaving the inner city is restrictive zoning laws. Some areas that were once industrial and commercial have been gentrified and strict noise restrictions may be in place. The use of chemicals is banned in many inner city areas and other limitations may apply. The local council can provide you with the zoning details you need.
What is the condition of the building?
Any property you purchase should be structurally sound. When buying an industrial property, you also need to look for signs of chemical spills and check for underground fuel storage areas. If renovations are needed on an older building, materials containing asbestos can be expensive to remove.
Are you making a rational decision?
Make decisions based on the property’s previous returns, its location and rental yield, not your emotions. Be sure the building complies with local, state and federal regulations. Find out what kinds of developments are planned for the area. Check existing and anticipated zoning regulations. If you’re buying in a city location, make sure the building can adapt to changes in zoning laws.
Will tenants want to lease the property?
A building can have everything you’re looking for, but lack elements tenants are looking for. Is there sufficient parking available? Is the building in a prominent location? Is access easy? Is it close enough to public transportation? Tenants want a building they can work in, but they don’t want to be isolated.
Adaptability is an important key to success. An industrial property should be able to adapt to the needs of a variety of businesses. If you buy a stand-alone commercial industrial property, be aware that zoning laws can change. Can your building adapt to those changes and still attract tenants?
As a first-time buyer, you will probably overlook some important details. A good commercial real estate agent can help you make a more informed decision, but don’t neglect your own education. As you view properties, ask questions and take notes. Wait until you find a property that satisfies your needs. Make the right decision and a commercial industrial property can be a better buy than a residential property.