There is one segment of the property market that has been humming along without fanfare and it’s proving to be very profitable for vendors.
I'm talking about the older style factory in the long-established parts of town. The foundational bricks ‘n’ mortar that industrial Dandenong was built on. This asset class has plenty going for it and buyers are warming to these solid industrial gems for good reason.
To begin with, they mainly sit on Industrial 1 zoned land which is more flexible than some of the lighter industrial zones we've recently seen allocated to new estates.
Furthermore, many of these factories were built on freehold titles at a time when smaller blocks were much more prominent. These days, finding Industrial blocks in Dandenong under 2000m2 is akin to sourcing hen's teeth or flying pigs. Versatile blocks under 2,000m² are simply not created in Greater Dandenong anymore. This narrows the options for buyers requiring warehousing under 800m² to strata developments- and that means owners corporations, common areas, and less control over your asset.
Sure, older style factories are not the prettiest. They usually appear a bit dated and some are in need of a facelift, but considering the strong demand for simple practical factories in this area by owner-occupiers and tenants, there is plenty of time down the track for simple refurbishments. Updated offices, rendered facades and simple paint jobs give these old timers an instant push into today.
Finally, we can’t possibly ignore the affordability factor. There's no doubt that an older factory is cheaper than a new factory when we are seeing sub 1000m² warehouses achieve in excess of $1800/m² in some cases.
Many vendors have been well rewarded with the passing of time as Dandenong has evolved. With low-interest rates, continued population growth, and lack of stock on the market, we've seen first-hand some great success stories in recent months. Older factories achieving prices often reserved for their cleaner, contemporary offsiders. The market continues to warm but it won't always be the case. Take advantage while the stars are aligned and competition from buyers remains buoyant.
Matt O'Dea is a Partner at Facey
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