November 15, 2016

Greater Flexibility Can Lead to a Higher Price

Every large development site is different in size, potential and location.  While this can create some pricing uncertainty, it can also result in innovative ways to develop these sites.  The best solution can sometimes be difficult to determine, with this being a balance between optimal block size, potential uses, access and street requirements, and other related property and economic factors.

An excellent example of the process sometimes required to meet the goals of buyers and vendors of large industrial development sites is the recent sale of 31 Boundary Road, Carrum Downs.  The 4.03 hectare (9.96 acres) site sold for $3.675 million in August 2016 after an expression of interest campaign.  The vendor was satisfied with the price achieved, while the buyer will be able to generate sufficient returns by developing the site to maximise its potential

Michael Crowder, Director, explains, “Despite a shortage of serviced industrial land in Carrum Downs, this was a difficult site to sell.  Environmental factors, such as buffer zones, vegetation protection requirements, and some soil contamination and asbestos, placed restrictions on layout and block size, and would contribute to higher site preparation and construction costs.”

In response, Crowder and sales agent Josh Monks commissioned a feasibility study that proposed a 29-block subdivision with industrial properties ranging from 1,000m2 to 1,500m2 to optimise the site’s potential.  However, constructive feedback showed that likely buyers were put off by the high costs associated with required development levies, street construction, lighting and other infrastructure. 

Crowder continues, “A revised subdivision proposal was developed, comprising seven sites at around 4,000m2 each that used the existing streets along the sides of the whole property.  This turned out to be much more cost effective, resulting in renewed interest in the property and an eventual sale that the vendor was happy with.”