One of the key themes that I’ve always focused on throughout my investing journey has been the importance of investing in blue-chip assets.
For me, that means the asset is in a prime location, has strong demand and has a long-term history of capital growth.
When most people think blue-chip property, they think about a home in Bondi or an apartment in Point Piper, however, there is also the possibility of buying blue-chip assets that are not just in the residential sector.
One of the best investment classes in recent years has been the commercial property sector and in particular industrial property. Industrial assets have seen a huge jump in demand in recent years and with more bricks and mortar businesses moving online this has rapidly increased the need for more warehouse space.
This has really turned the industrial sector in Sydney into a blue-chip asset.
With demand soaring but supply remaining low there has been a real imbalance that has started to show up in the market. In fact, in Sydney right now, the industrial vacancy rate is sitting at 0.2 per cent. That’s lower than the current residential vacancy rate which is in the midst of a rental crisis and far lower than something like the office sector, which has a vacancy rate of upward of 15 per cent.
Tight vacancies typically mean that there is strong competition and that translates into higher rents. Commercial property is also priced based on its yield and that means the current supply/demand imbalance presents a great opportunity for investors.
However, to be clear, just like when you’re buying a residential property, you still need to be very selective when you’re assessing a commercial building.
At the moment, you could probably buy any light industrial building and still be doing okay out of it, but it still comes down to making sure that it’s in the right location. It needs to be well positioned and if it is for distribution purposes and you’re looking for those kinds of tenants or someone who runs a small business it needs to be central as well.
That means it should be close to your main arterial roads to allow for easy accessibility and for staff access, so that should be one of your first considerations.
There are also a host of other factors that you need to consider as well including the quality of the building and the features that it comes with, the zoning, the tenant or tenant mix as well as things like the lease terms. However, it all starts with the location.
The principles for investing in high-quality blue-chip assets are very similar, regardless of whether you’re looking at a commercial warehouse or premium residential property in the eastern suburbs. You’re on the lookout for locations that have a long-term track record of growth as well as high demand. Couple that with tight supply and you have the making of a very solid long-term investment.
If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.
