Buyers pull out all stops to snap up warehouse apartments and conversions
Warehouse apartments and freestanding converted industrial buildings are routinely achieving exceptional prices in inner-Melbourne – and it’s not difficult to see why.
A veritable smorgasbord of factors is ratcheting up the bids for these unique properties.
One is societal change, which is spearheading a major trend to people working from home, nowhere more so than in Australia’s inner-urban areas. Another key driver is the rising consumer demand for roomier and ultra-contemporary living spaces.
Warehouse properties are also extremely popular with tenants. The fourth – and most important – factor underpinning growth is that warehouse conversions have the runs on the board when it comes to investment fundamentals and generating an above-market rate of capital appreciation.
Two recent Nelson Alexander auctions of warehouse-style properties delivered extremely positive results for their vendors.
In March, Nelson Alexander auctioneer Arch Staver sold a converted former cinema at 2 Napier Street, Fitzroy, for $3.7 million.
The sale of three-bedroom property delivered significant capital growth, as Nelson Alexander had previously sold the property just four years earlier for $2.8 million.
Also in Fitzroy, a moderately-priced warehouse apartment sold for more than 10 per cent above reserve in April.
The two-level apartment with city skyline views from one of its two balconies at 6/5 Spring Street, Fitzroy, was quoted at $850,000 to $910,000.
Three keen bidders competed hard for the apartment, one of just eight apartments in the development and featuring a generous 122 square metres of living space.
Mr Staver declared the property on the market at $915,000 but the final two bidders pushed the sale price to $1,021,000.
The unique, character-filled nature of warehouse/factory conversions are their greatest selling point.
High ceilings, exposed timber beams, unusual floor plans and size are the big attractions, along with timber floors, brickwork and arched or simply overly large windows and lofts.
Mr Staver says Nelson Alexander’s 17-office network is tracking a big increase in the development of new warehouse apartments and conversions, including a growing number in outer areas such as Essendon, Strathmore and Ascot Vale.
“Most of our Victorian architecture, unless it is extensively renovated, is all corridor and rooms off the corridor,” Mr Staver says.
“I think people like the way that warehouse and converted space is used in a more contemporary way that is mostly open plan and does not have long hallways.
“There is something charming and appealing to having an industrial feel to a residential property – it is something different and will always appeal to a certain type of buyer.”
Until 10 years ago there was a well-founded fear among property investors and some owner-occupier buyers that warehouse apartments were not a good investment.
At that point, warehouse conversions did not have a consistent track record of capital appreciation, but since then hundreds of warehouse apartments have changed hands and they have seen some very strong capital growth.
Mr Staver said the tide had changed and warehouse apartments were now extremely popular with investors.
This was being driven by the high demand from tenants for this type of accommodation and the relatively low maintenance profile of such properties.
“Warehouse properties are the new single-front terrace,” Mr Staver says. “If you have a good warehouse apartment in a good street, you can rest assured that it will appreciate in value.”
Early warehouse apartments in Melbourne often lacked outdoor space, but this is changing radically. These days, developers try to incorporate outdoor areas where possible in the form of courtyards or rooftop gardens and sometimes lap pools.