- August 13, 2023
- Posted by: Research Desk
- Categories:
Realistic valuation of an industrial property will depend on many factors other than the previous transaction rates nearby. While recent nearby transactions can set the benchmark, other characteristics of the property also will have a significant bearing on the sale price.
The valuation of the property can be higher or lower based on conditions. Companies don’t have a real estate aspirational outlook when buying an industrial property as they are usually looking for suitability of operations and supply chains.
Let us look at some of the possible scenarios for plots of sizes ranging from, say, 3 to 25 acres
- Availability of similar plots.
This will keep the valuation at average as long as there are ‘similar’ plots nearby, same as any other real estate asset. But then, if the official published land rates of the industrial area are competitive, we can say the landlord is in a fair position.
Key – Patience
- Classic Industrial Plot with not many comparable options
Clean dimensions, good roads, good dimensions, and in the middle of an active industrial zone is a good property to sell and fetch a solid price at the same time.
Key – Active Marketing
- Mega Frontage onto the highway;
This is a good plot to have with easy truck ingress and exits. Heavy industries prefer this type of entry / exit for trailers.
If the property is in an industrial area close to a major city, then the landlord can look at a profitable deal. Potential suitors will be Data Centers, Large Format Retail and IT/ITeS/Mixed Use Real Estate Developers.
Key – Industry Trend Awareness
- Good plot but not so great surroundings
If the surrounding areas at the time are not the most desirable, due to whatever reasons like, for example, there is substantial pollution / risk of flooding or landslides. The landlord will not be in a strong position to dictate the pricing. Staying at market price will be a solid goal in such situations.
but for large plots, more offset is available from surroundings, giving the landlord a counter against the challenges
Key – Extensive marketing, industry networking
- Bad Mortgage/Liability
Tough situation but the landlord should be wary of the incoming parties. In the promise of getting the property clear fast, one should not end up with unreliable buyers and simply lose control of the plot via non real estate agreements which are drafted by parties who are more interested in arbitrage than development of the plot.
Key – Discretion