An Australian real estate professional says industrial real estate is ripe to get a boost off the slowing housing market.
Barry Cawthorn is from Bawdens Industrial and says investors are turning to industrial real estate to sort out their cash flow problems and because they carry doubts about how much more the residential property market can go up.
“People are coming back and revisiting industrial real estate now,” he told Your Investment Property.
“They’re looking for somewhere to invest but they’re concerned about the volatility in the share market and they don’t want to look at residential property right now so they’re thinking about moving some money into the industrial market.”
“We’re finding a lot of people right now are saying capital growth is great, but I can’t eat that now and I need to improve my income.”
Investors moving to the industrial market don’t have to dive right into large scale factories and warehouses, they can enter the market at the smaller end.
“Sydney investors are realising that a small industrial strata unit can be purchased for half the capital outlay compared to a home,” Mr Cawthorn told Your Investment Property.
With Melbourne house prices the second most expensive in the country, things are similar there.
“We know that a 5.5 per cent net yield on a property under $400,000 is about what you can expect in the industrial market in Sydney currently,” Mr Cawthorn said.
“You can add capital growth of 5-8 per cent a year to that and then you’re seeing your total returns are over 10 per cent a year.”
“At the lower end you’re not going to get returns of 15 per cent a year, but you will get 10 per cent. For somebody who may only have $400,000 to spend that’s attractive because you’re not going to get anything like that from the residential market at the moment.”