What Not to Do When Buying a Logistics Hub

Underestimating How Lenders Value Industrial Cash Flow

Lenders assess logistics hubs differently than retail or office properties, focusing on lease covenants and tenant strength over location appeal. A logistics facility leased to a national freight company with eight years remaining will typically support higher borrowing than the same building on a shorter lease to a local distributor, even if both pay identical rent.

Consider a buyer looking at a 3,500 square metre warehouse in Somersby with five years left on the lease to a national courier. The property generates $420,000 annually. The lender reviewed the tenant's financials, confirmed the lease covenant, and offered 65% LVR with full recourse to the borrowing entity. When the same buyer enquired about a similar facility leased to a regional logistics operator with two years remaining, the LVR dropped to 55% and required a director guarantee. The difference came down to tenant creditworthiness and lease tenure, not the building itself.

Some buyers assume industrial properties are valued purely on a per-square-metre basis. Lenders weight rental income security more heavily than comparable sales when determining what they'll lend against a logistics asset.

Structuring Deposits Without Considering Pre-Settlement Income

Most commercial property loans require a deposit between 25% and 35% of the purchase price. Where that deposit sits before settlement affects how quickly a lender can approve your application and whether you'll need bridging finance.

Funds held in an offset account against an existing commercial loan are usually acceptable as deposit evidence. Funds tied up in term deposits maturing after your settlement date create a timing problem. In one scenario, a logistics buyer had $800,000 in a term deposit maturing three weeks after settlement on a $2.4 million purchase. Rather than break the term deposit and forfeit interest, the buyer structured a short-term bridging facility to cover the deposit shortfall, with the term deposit assigned as security. The bridging loan settled two days before the main commercial loan, and the term deposit was released on maturity to repay the bridge.

If your deposit includes funds from a property sale, business sale, or partnership buyout, most lenders want to see those funds cleared into your account at least three months before settlement. Funds arriving within 90 days often require a statutory declaration explaining their source, which can delay credit assessment.

Overlooking How Building Age Affects Loan Terms

Logistics properties built before 1990 often face lower LVRs and shorter loan terms than newer facilities, particularly if they include asbestos or lack modern loading infrastructure. Lenders treat older industrial buildings as higher-risk assets because they're harder to re-lease if a tenant vacates.

A buyer looking at a 1970s-era warehouse in Wyee was offered 60% LVR over 15 years. The building had asbestos in the roof sheeting and a single roller door. A comparable facility built in the early 2000s with multiple dock doors and no asbestos received 70% LVR over 20 years from the same lender. The difference in serviceability was significant. The older building required an additional $240,000 in deposit and monthly repayments nearly $1,800 higher due to the shorter term.

Before committing to a contract, confirm your lender's appetite for the building's age and condition. A valuer's report noting deferred maintenance or non-compliant materials will reduce the amount a lender is willing to advance, even if the purchase price reflects those issues.

Ignoring Settlement Timing and Rate Lock Implications

Commercial loan approvals typically include a rate lock period of 90 days. If your settlement date falls outside that window, you'll need to reapply for rate approval, and the rate offered may differ depending on market conditions at the time.

Longer settlement periods suit buyers who need time to arrange tenants or complete due diligence, but they introduce interest rate risk if you're locking in a fixed rate. Variable rate facilities offer more flexibility because the rate floats until drawdown, but fixed rates require careful alignment between contract terms and rate lock expiry. If your solicitor negotiates a 120-day settlement and your lender's rate lock expires at 90 days, you'll be exposed to rate movements in the final 30 days unless you pay a fee to extend the lock.

In situations where the seller agrees to a longer settlement to accommodate tenant transition, consider whether your commercial finance structure should include a provision for early drawdown. Some buyers arrange for the loan to settle early and pay the seller interest on the purchase price until formal settlement. This locks in your rate and removes uncertainty, but it requires the seller's agreement and a solicitor who can draft the arrangement correctly.

Mismatching Loan Structure to Ownership Intent

Logistics hubs purchased as long-term holdings should be structured with principal and interest repayments to build equity and reduce debt over time. Properties acquired for repositioning and resale within three to five years are better suited to interest-only periods that preserve cash flow during the hold period.

A buyer purchasing a logistics facility with plans to subdivide the site and sell off a parcel within four years structured the loan as interest-only for five years with a line of credit for future site works. This kept monthly repayments lower and allowed the buyer to draw additional funds as needed without reapplying for finance. If the same buyer had chosen a principal and interest loan with no redraw, they would have needed separate equipment finance or a second facility to fund the subdivision works.

Interest-only loans typically come with slightly higher interest rates than principal and interest facilities, but the difference is usually between 0.10% and 0.25%. The cash flow benefit often outweighs the rate difference when your business plan involves reinvestment or near-term asset changes.

Failing to Confirm Zoning Permits Your Intended Use

Lenders require confirmation that your intended use aligns with the property's zoning and any development consent conditions. A logistics hub zoned for warehousing and distribution may not permit vehicle repairs, hazardous goods storage, or 24-hour operations without additional council approval.

One buyer contracted on a Warnervale industrial property intending to operate a cold storage facility with refrigerated trucks running overnight. The property was zoned light industrial, and the existing consent limited operating hours to 7am-6pm weekdays. The buyer's solicitor identified the restriction during due diligence, and the buyer had to apply for a modification of consent before the lender would approve the loan. The modification took six weeks and cost $8,500 in council and consultant fees. The delay pushed settlement out, and the buyer had to extend the rate lock at a cost of $1,200.

Your solicitor should review the zoning certificate and any consent conditions before you exchange contracts. If your intended use differs from the existing tenant's use, confirm with council whether a new development application or modification is required. Lenders will not settle a commercial property loan if there's any doubt about use compliance.

Underestimating the Cost of Specialised Valuations

Commercial property valuations for logistics hubs typically cost between $2,500 and $5,000 depending on the property size and complexity. Lenders require a full valuation from a certified valuer before approving the loan, and the buyer pays this cost upfront.

Logistics properties with additional land for expansion, or facilities that include cool rooms, high-clearance storage, or heavy-duty flooring, require more detailed inspections and take longer to complete. A standard warehouse valuation might take 10 business days. A specialised logistics facility with multiple tenancies, varying lease terms, and site improvements can take three weeks or more.

If your contract has a short finance clause, factor in valuation timing when submitting your loan application. A valuation ordered late in the finance period may not be completed before the clause expires, leaving you at risk of losing your deposit if you can't settle. Some buyers order an independent valuation before making an offer to confirm the property's worth and speed up the lender's process, though this means paying for two valuations if you proceed.

Call one of our team or book an appointment at a time that works for you. We'll walk through your logistics purchase, confirm what lenders will support based on the tenant and lease terms, and structure the deposit and settlement timing so your finance aligns with your contract.