Industrial Flashcards
What is the major determinant of value for industrial properties?
It’s utility
What are the 4 broad types of industrial property?
Hi Com Industrial (Hi tech) (high proportion of office)
Transport Orientated
Warehouse/Production
Specialised Industrial - designed for special use eg. food production
What zonings allow for industrial use?
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
What is the method of measurement for industrial property?
Gross Lettable Area (IPMS 3a - Industrial) - measure outside faces of external walls, or midpoint of connected property walls/partitions
What does a high yield tell us, for an industrial property?
Short remaining lease
Rental above market
Specialised property with limited appeal
Non-conforming use
What does a low yield tell us for an industrial property?
Below market rent with imminent review
Long lease and new buiilding
surplus of land or redevelopment potentional
What are the important location factors for industrial property?
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.
What are important design/construction factors for industrial property?
Always relates depending on the use. Basic attributes include clearance, size, % of office, amenities, improvements
What improvements are important with industrial property?
The building, canopies, hardstand areas, driveways, car parking, site services, site levelling, filling and drainage.
What are typical clearance heights for industrial? What is a clearance for shipping container or semi trailer?
industrial clearance heights usually start at 4.5m and go above 10m. Container height is 4.3m and semi trailer clearance is 6m
What are some important industrial building design considerations?
Access points for vehicles, driveways, allowance for trucks to turn around or exit efficiently
What are 3 critical factors to look at for industrial warehouses
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
What is the office to warehouse percentage usually?
15-30%
What are some alternative considerations outside the fundamentals to make when looking at industrial properties?
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
Where would you look for contamination (In general)?
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
What are some typical industrial outgoings?
Rates, fire services levy, water system charges, sewerage system charges, land tax, insurance
With industrial (commercial in general) what do outgoings not include?
Interest on overdue outgoings, capital expenditure, depreciation or sinking fund, agents letting fees
Explain the uses for the three industrial zones
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
On inspection what may indicate contamination?
Underground storage tanks
Oil collection pit
Surrounding land uses
Chemical drains
Discoloured soil
Odours
Chemical spills
Drill holes
Explain non-conforming use if i have an industrial property on what is now residentially zoned land
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
When performing an industrial inspection what would you observe that tells you about the utility of the property?
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
If the property is contaminated and there are remediation costs, how do you tackle this?
Assess land value as clean, (hypothetical development) and work backwords to include contamination/remediation to make land clean
What is the relevant legislation for contamination?
Environmental Protection Act 2017
What are some essential safety measures to look for in industrial?
Fire stuff, sprinkler systems, emergency exit lighing, extinguishers
Are mezzanines including in building area?
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)
When measuring industrial what are some important considerations?
High point of warehouse and low point and in between
What methodologies are used for industrial properties?
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)
If industrial proeprty is subject to RLA how would you treat it?
Prefer to use other industrial properties with RLA too, can also just subject land tax out of net rent.
Theres an 8 acre industrial property youre asked to value, how do you go about that?
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
Rental rates for industrial areas? Yields?
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
