Warehouse apartments set for strong price growth in 2015

The market for warehouse apartments in inner Melbourne is on a fast-moving growth trajectory.

Only five or six years ago, there were well-founded concerns that warehouse apartments were a problematic investment. Warehouse conversions were widely seen by the broad mass of buyers as not having a track record of capital appreciation.

But these attitudes have been turned on their head. Since 2008, many warehouse apartments and single-building warehouse conversions have changed hands and produced strong capital growth.

Property industry insiders also say warehouse or factory conversions are rarer than they were in the late-1990s. With a limited supply of warehouse apartments, the scarcity factor is kicking in.

At Nelson Alexander, we’re seeing a larger of pool of buyers – including professional couples, baby boomers, young families and blended families with older children – making offers for well-located warehouse apartments. We expect sustained price growth for this property category through 2015.

“Over the past 12 months, there have been numerous sales of warehouse apartments in the inner city for well in excess of $1 million,” says Nelson Alexander partner and auctioneer, Luke Chisholm.

“Single-building warehouse conversions, where you own the whole building, are the prestige end of the warehouse market and these self-contained homes can sell for more than $2.5 million.”

Nelson Alexander recently sold a large, single-building warehouse home with a roof terrace and a substantial car park at 2 Napier Street, Fitzroy, for $2.85 million.

“The property sold before its first open-for-inspection – it wasn’t even advertised online,” Mr Chisholm says.

In the second half of 2014, Mr Chisholm sold several adjoining tri-level warehouse apartments in Easey Street, Collingwood, for strong prices.

Number 92 Easey Street, which has a large roof terrace and is close to Smith Street, attracted competitive bidding at auction from four parties. The four prospective buyers fought hard to secure the three-bedroom unit, one of six in a former denim-making factory. The property was on the market at $1.155 million and sold for $1.237 million.

Another warehouse residence that performed exceptionally strongly in 2014 was 14/144 Rose Street, Fitzroy. The vendor was Julia Zemiro, the host of SBS’s RocKwiz who was relocating to Sydney. Her two-bedroom, industrial-chic property, which had a quote range of $720,000 to $800,000, attracted six bidders. Nelson Alexander’s Arch Staver got an opening bid of $771,000 and put the property on the market at $800,000. A late-entrant bidder waited until the competition was nearly spent before offering $885,000. He won out at $910,000.

Because it’s very easy to break up a warehouse dwelling into different zones, they appeal strongly to buyers who work from home or run small and micro-businesses.

The mix of residential and commercial applications in authentic warehouse conversions only broadens their buyer appeal.

Mr Chisholm says demand for warehouse apartments is shaped by their scarcity. He says warehouses are comparable in this regard to single-fronted Victorian cottages.

“They don’t make them anymore and that makes them a sought after commodity,” he says.

“Warehouse apartments are now looked on by the market in the same way as single-fronted cottages. With all the new construction and the shiny new apartments going up, warehouses have a point of distinction.

“They have features that new apartments don’t have such as high ceilings, exposed beams and superbly-crafted brick and bluestone walls that are 80 or 100 years old.

“Many buyers come to Fitzroy, Abbotsford and Collingwood with the romantic notion that they want to live in a New York-style warehouse apartment.”

Property investors are also showing stronger interest in warehouse apartments as the property category gains greater acceptance among different demographic groups.

Over the past 12 months, Nelson Alexander has seen a trend to more young families embracing living in warehouse apartments. We expect this demand driver to help boost price growth in 2015.

“I think there is a shift away from families in the inner-city automatically moving from an apartment or a small house to a larger house,” Mr Chisholm says.

“Not everyone with a growing family wants to follow that natural progression out to a house in Northcote or Brunswick with a big backyard. There are now family buyers that are happy with an apartment that has a balcony or a roof terrace, and which is much closer to inner-city activity.”