Build It Once, Lease It for Decades: What Makes an Industrial Development Last

Build It Once, Lease It for Decades: What Makes an Industrial Development Last
 

Every development is a bet on the future. Not only on what the market will pay at completion, but on whether the building will still be in demand in ten, twenty or thirty years.

It’s relatively easy to design for the first sale or the first lease. It’s much harder to design for every lease that follows. Yet that’s where the lasting value of an industrial development is decided.

For October, our sales and property management team reflected on the developments they’ve watched hold their appeal over decades across Melbourne’s North and West, and the ones that haven’t.
 

Maximum Site Coverage Isn’t the Same as Maximum Value

One of the most common decisions we see is pushing site coverage as high as the controls allow. On paper, more lettable area means more income and a higher end value.

But a building that covers 70% of its site often gives up the very things industrial occupiers are finding hardest to secure: hardstand, truck circulation, parking and room to operate.

Some of the most sought-after assets in the market today are those with lower site coverage and generous hardstand. They’re scarce, and because they’re scarce, they can achieve stronger values per square metre than more densely built properties.

One developer we work with has deliberately built this way for years. His properties may not deliver the highest possible return on day one, but they lease consistently and they’re the assets tenants ask about first.
 

Clearance Height Is a Decision You Live With for Decades

Specification choices made today will either keep a building relevant or date it early.

Clearance height is a good example. Ten to fifteen years ago, many developments were delivered with six-and-a-half-metre clearance because it was cheaper to build at the time. The developers who chose ten metres were well ahead of the market.

Today, higher clearance has become close to standard. The buildings that offered it early remain in demand, while lower-clearance stock has to work harder to compete for the same occupiers.

The same thinking applies to other specifications that are difficult to change once a building is complete. Floor loading, power supply, roller door sizes, sprinkler systems, solar capacity and the placement of loading areas all influence which occupiers a building can serve. Getting these right at the outset costs far less than trying to retrofit them when a prospective tenant asks.

The lesson isn’t to over-specify every element. It’s to think carefully about which features will matter to the next generation of occupiers, not only the first.
 

Build for the Gap in the Market

Developers who build lasting portfolios share a habit. They don’t simply build what they want, or what fits most efficiently on the site. They build what’s missing.

If the surrounding precinct is already well supplied with small strata units, adding more of them only increases competition for the same pool of buyers and tenants. A larger site may be better used for a product the local market is short of, whether that’s a single substantial facility, units with drive-through access or premises with generous yard space.

Identifying that gap relies on current, local information. Which enquiries are going unmatched? What size ranges are leasing fastest? Which types of occupier are struggling to find suitable space? Agents who handle sales, leasing and management across a precinct hear these answers every week.

Market evidence should shape the brief before the plans are drawn, not after.
 

Don’t Overcapitalise on Features the Market Won’t Pay For

Ambition has its place, but it needs to be matched by demand.

We regularly speak with developers planning premium office components, high-end finishes or unusual configurations in locations where occupiers won’t pay a premium for them. Recently, we were approached about a run of high-specification offices in a suburb that simply doesn’t have the depth of demand to support them. Another proposal involved a multi-level storage concept across a very large industrial site. It carried a significant price tag and a design that would have looked more at home as a shopping centre than an industrial asset.

In both cases, our advice was the same. A practical building that fits the market will usually outperform an impressive one that doesn’t.
 

Design for Flexibility

The occupier who leases a building first is rarely the one who occupies it in fifteen years. A design that works for only one type of business can become a liability once that business moves on.

Developments that last tend to offer flexibility. Warehouses that can be divided or combined, office components that can be reconfigured without major works, column spacing that suits a range of racking layouts and yard areas that can accommodate different vehicle types all widen the pool of future tenants and buyers.

Flexibility rarely costs a great deal when it’s considered at the design stage. Retrofitting it later is a different story.
 

Good Tenants Are Worth Building Around

Long-term relationships matter as much for developers as they do for investors.

Developers with enduring portfolios know exactly who their good tenants are. When one of those tenants outgrows their premises or signals they may move, the developer doesn’t simply let them go. They look across their holdings for an alternative or, in some cases, build something to suit.

Retaining a reliable occupier across multiple properties reduces vacancy risk and strengthens a developer’s standing in the market. That kind of relationship doesn’t happen by accident. It comes from staying in contact with tenants, understanding how their businesses are changing and involving property management well before a lease is due to expire.
 

Hold Some of What You Build

The team also noted a common thread among developers who have built the strongest portfolios over time. They keep developing through different market conditions, and they’re prepared to retain completed assets rather than selling everything at practical completion.

Over the years, those retained assets become the foundation of a portfolio that can be passed on, and a source of income that supports the next project.

Holding also changes how a developer thinks about the build. When you expect to own a building for twenty years, decisions about materials, specification and maintenance access look very different from decisions made with a quick sale in mind. Many of the qualities that make a development easy to hold are the same ones that make it easy to lease.
 

Get the Advice Before You Build

If our team could offer one piece of advice to anyone hoping to build a lasting industrial portfolio, it would be this: check in with a specialist before committing to a design.

Most importantly, a practical review of the plans can confirm whether the design works for its intended use. The most common mistake we see is restrictive access, with too little room for trucks to turn and manoeuvre in and around the facility. A review can also confirm whether the product suits the market, whether the specification is right for the likely occupier and whether any elements are adding cost without adding value. It’s a small step that can prevent decades of compromise.
 

Final Thoughts

The developments that last aren’t always the ones that look most impressive at launch. They’re the ones that keep leasing, keep performing and keep attracting the right occupiers long after the first tenant has moved in.

At Rutherfords, our sales, leasing and property management teams draw on generations of experience in Melbourne’s North and West industrial market. If you’re planning your next project, we’re happy to look over the plans, share what occupiers are asking for right now and give our professional opinion on the practical use of the site, not just for today, but for the 20 years ahead.

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