Industrial

Question 1

What is the major determinant of value for industrial properties?

Answer 1

It’s utility

Question 2

What are the 4 broad types of industrial property?

Answer 2

Hi Com Industrial (Hi tech) (high proportion of office)
Transport Orientated
Warehouse/Production
Specialised Industrial - designed for special use eg. food production

Question 3

What zonings allow for industrial use?

Answer 3

Industrial 1 Zone (least permitting, no retail)
Industrial 2 Zone (lighter uses)
Industrial 3 Zone (used to provide a buffer between industrial 1,2 zones and the community)
Commercial 2 Zone - allows a variety of uses, still needs to be somewhat restricted as it will be near residential
Mixed use - allows for industrial uses but with permits

Question 4

What is the method of measurement for industrial property?

Answer 4

Gross Lettable Area (IPMS 3a - Industrial) - measure outside faces of external walls, or midpoint of connected property walls/partitions

Question 5

What does a high yield tell us, for an industrial property?

Answer 5

Short remaining lease
Rental above market
Specialised property with limited appeal
Non-conforming use

Question 6

What does a low yield tell us for an industrial property?

Answer 6

Below market rent with imminent review
Long lease and new buiilding
surplus of land or redevelopment potentional

Question 7

What are the important location factors for industrial property?

Answer 7

Accessibility to sources of material
Accessibility to skilled workforce
Accessibility to required markets
Adequacy of transport and service infrastructure
Position on highway – exposure.
Usually on fringe as require large flat tracts of land.

Question 8

What are important design/construction factors for industrial property?

Answer 8

Always relates depending on the use. Basic attributes include clearance, size, % of office, amenities, improvements

Question 9

What improvements are important with industrial property?

Answer 9

The building, canopies, hardstand areas, driveways, car parking, site services, site levelling, filling and drainage.

Question 10

What are typical clearance heights for industrial? What is a clearance for shipping container or semi trailer?

Answer 10

industrial clearance heights usually start at 4.5m and go above 10m. Container height is 4.3m and semi trailer clearance is 6m

Question 11

What are some important industrial building design considerations?

Answer 11

Access points for vehicles, driveways, allowance for trucks to turn around or exit efficiently

Question 12

What are 3 critical factors to look at for industrial warehouses

Answer 12

Low clearance height - may suit manufacturing but may not suit warehousing
Internal columns - may limit how the space can be used for movement of goods
Uneven floor levels - inhibit forklift operation

Question 13

What is the office to warehouse percentage usually?

Answer 13

15-30%

Question 14

What are some alternative considerations outside the fundamentals to make when looking at industrial properties?

Answer 14

Very important to look at excess land that could be subdivided or utilised, proximity to arterial routes and shipping ports or airports is important
Checking for asbestos
Summation method can be important if there is lots of options to a prudent buyer - they may wish to build their own unit to exact specs

Question 15

Where would you look for contamination (In general)?

Answer 15

Could be apparent during inspection (chemical containers, current/nearby use, smell, underwater storage tanks, drill holes)
Environment Protection Authority (EPA) - Sites Register
Victoria Unearthed
Environmental Site Audit
Googling address of property

Question 16

What are some typical industrial outgoings?

Answer 16

Rates, fire services levy, water system charges, sewerage system charges, land tax, insurance

Question 17

With industrial (commercial in general) what do outgoings not include?

Answer 17

Interest on overdue outgoings, capital expenditure, depreciation or sinking fund, agents letting fees

Question 18

Explain the uses for the three industrial zones

Answer 18

Industrial 1 - manufacturing, industry, storage and distribution (must not conflict neatby uses)
Industrial 2 - manufacturing, industry, storage and distribution (may conflict with uses in other area)
Industrial 3 - Provides a buffer for Zone 1 or 2 and the local communities

Question 19

On inspection what may indicate contamination?

Answer 19

Underground storage tanks
Oil collection pit
Surrounding land uses
Chemical drains
Discoloured soil
Odours
Chemical spills
Drill holes

Question 20

Explain non-conforming use if i have an industrial property on what is now residentially zoned land

Answer 20

Existing use rights may exist here - if they have a permit, if the property conformed with the zoning before it was rezoned it may have existing use rights. These would cease if the property was not used/occupied for more than 2 years, or if 50%+ or more of the building is destroyed

Question 21

When performing an industrial inspection what would you observe that tells you about the utility of the property?

Answer 21

Clearance height, slab of floor (even?), driveway access, can you drive through and out somewhere else, can you turn around easily, can you get racking in, can you drive a forklift, can you load a truck, is it clear span, hardstand area, carparking

Question 22

If the property is contaminated and there are remediation costs, how do you tackle this?

Answer 22

Assess land value as clean, (hypothetical development) and work backwords to include contamination/remediation to make land clean

Question 23

What is the relevant legislation for contamination?

Answer 23

Environmental Protection Act 2017

Question 24

What are some essential safety measures to look for in industrial?

Answer 24

Fire stuff, sprinkler systems, emergency exit lighing, extinguishers

Question 25

Are mezzanines including in building area?

Answer 25

According to IPMS they are not included in building area (a lot of them arent even council approved anyway)
Under GBA you would do building area plus mezzanine area (list seperately)

Question 26

When measuring industrial what are some important considerations?

Answer 26

High point of warehouse and low point and in between

Question 27

What methodologies are used for industrial properties?

Answer 27

Leased - income cap
Vacant - direct comparison
Rural - can use summation approach
20-30 mill and institutional valuations - DCF (this is what purchasers usually use at this point, so valuers should too)

Question 28

If industrial proeprty is subject to RLA how would you treat it?

Answer 28

Prefer to use other industrial properties with RLA too, can also just subject land tax out of net rent.

Question 29

Theres an 8 acre industrial property youre asked to value, how do you go about that?

Answer 29

Looking at the attributes of the property - land size and shape, easements, checking title for encumbrances.
Looking at zoning and whether it is in the urban growth boundary
Can start to establish highest and best use + development potential
Checking contaminaton on the site

Going to a turner approach (if we have costings and plans) or direct comparison

Question 30

Rental rates for industrial areas? Yields?

Answer 30

For Prime Industrial -
City Fringe - $180/sqm
West - $132
North - $133
East - $123
South East - $135

Yields for these areas are also sitting between 5-6.5% (with city fringe being the lowest)

Q2 2024 Knight Frank report