With a handful of industrial assets currently returning yields of approximately eight per cent, finance broker and director of Loan Centric, Paul Miles believes industrial property makes an excellent long term investment – and has many favourable advantages over residential or other types of investments such as shares.
Having facilitated thousands of mortgages for clients, for Paul, it’s all about the yields.
The seasoned investor has recently added a 150 sqm industrial unit to his property portfolio which he purchased off the plan at the Interlink Strathfield industrial estate located in Sydney’s inner west, being developed by Primewest Development.
“If you buy industrial assets in the right location in close proximity to the CBD, with the right size of unit, you’re never going to go wrong with the yields,” he said.
“Vacancies are low in Strathfield. Wherever there are low vacancies for industrial – you can’t go wrong as you’re always likely to have your property tenanted.
“All of my industrial property has been at about eight per cent yield while you’re lucky to get three per cent on residential and if you get three you’re doing well.
“And that eight per cent is a ‘true’ yield. You have gross yields and net yields. You always need to consider what is the asset is making, what is the rate of return and that’s how I work out the true yield,” he said.
Paul isn’t alone in seeing the virtues of industrial property with Primewest Development having sold more than 50 per cent of the industrial estate since launching earlier this year, indicating a strong appetite for prime industrial property in Sydney’s inner west.
The Interlink Strathfield estate encompasses 65 strata title industrial units sized from 150sqm up to 1,000sqm and 23 strata titled storage warehouse units sized from 23sqm to 80sqm. The site spans 26,000sqm and a low-density design allows ample space for wide driveways, parking and dedicated container drop zones allowing the estate to function smoothly and efficiently.
The site is located on a prime corner site on Cosgrove Road and Cleveland Street in Strathfield South in Sydney’s inner west, opposite the Enfield Intermodal Logistics Centre.
Primewest Development Director, Rob Thomas said industrial properties have garnered strong interest from local businesses and investors, selling in the low to mid $4,000’s per square metre.
“Since launching sales earlier this year, we have currently sold approximately 40 units, generating around $35 million in sales,” Mr Thomas said.
“Interestingly, these sales are at about a 50 50 split, owner-occupier to investor, which indicates investors such as Paul are being geared towards industrial assets over residential or other investments, which is a good sign for Sydney’s industrial property market.”
Capital gain not a key consideration
When it comes to capital gain, Paul said it wasn’t really a consideration in purchasing at Interlink Strathfield.
“Everyone should always be looking for capital gain but I was more interested in the yields that industrial attracts. Our plan is to pay off the asset within five years and live off the rent – it becomes a cash-flow positive asset,” he said.
“There are so many advantages in industrial to residential,” he continued. “It’s a lot easier to manage, if you get a bad tenant you can take action against them. In commercial property, you have a contractual obligation. You can’t hide behind a tribunal. Your tenant signs an agreement and they have to abide by it. With residential, tenants are protected by a governing body and that poses risks. Also a consideration is the longevity of the tenant – typically tenants will lease for three to five years in industrial properties, and pay all outgoings.”
When it came to purchasing at Interlink Strathfield, it ticked all the right boxes for him.
“With buying off the plan, there is always some degree of risk but there’s really not all that much on the market, plus I felt comfortable with the reputable developer. You don’t have that much choice. Do I like off the plan – typically not, but when you have an experienced developer who has runs on the board, the risk is minimal.
“Having worked as a finance broker for more than eight years, I know what’s a good deal and what’s not. I have many clients who have about $65 million in industrial assets for which we have facilitated loans. I’m well versed in what’s good and what’s not – Strathfield’s one of those suburbs if something comes up in industrial – you just want to grab it.”
From his experience as a finance broker, Paul commented that banks are more comfortable lending on industrial property assets than they are on residential investments.
Based in Pyrmont, Loan Centric currently facilitates over $100 million in mortgages per year and has over 30 lenders on its panel.
For enquiries regarding strata titled industrial units or storage warehouse units visit www.interlinkstrathfield.com.au
Or contact:
- Claire Barber, Primewest Development 0403 519 915
- Robert McLaurin, Niemeyer 0425 303 741
- Shaun Timbrell, CBRE 0433 302 979
