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A beginner’s guide to commercial property development

December 8, 2020

The land development and subdivision market in Australia is worth $13 billion according to research from IbisWorld[i]. Moreover, at Raine & Horne Commercial, we are bringing to market regular commercial property opportunities for owner-occupiers and investors. 

In recent times, we sold several properties in Adelaide with development potential including properties at 22 King William Street, Kent Town and a renovate or redevelopment opportunity at 227 Magill Road, Maylands

These types of opportunities usually attract owner-occupiers or self-managed super funds – and either way, the buyers may be new to property development. 

Assemble the right team

If you’re a commercial property development novice, the first thing you need to do is to assemble the right team. Apart from an experienced commercial property specialist such as Raine & Horne Commercial, this includes planning consultants and architects who can provide expertise across a wide range of disciplines, including design, planning, engineering, and construction.

As a new developer, you’ll need to be prepared to jump through plenty of council hoops. For example, the Maylands Road property is zoned for commercial. However, as it was most recently used for housing, the new owner will need to change its land use with the local council from residential to commercial. As part of the conversion, the property will require plenty of car parking and disabled access to win the council’s approval for a change of land use. Also, it’s worth noting that each state has its department of planning and, not all states are on the same page with the same rules when it comes to planning and land use matters. 

Moreover, even if you demolish the property, you must still jump through the same hoops with the council. There is a development application to run through, and so on. If you need assistance with converting an existing residential building or even a land redevelopment, this where an experienced planning consultant will prove an asset, especially if the project is a little trickier. For example, if the council requires a medical practice to have 12 car parking spots, and it seems like the developer can only find room for nine, a planning consultant could be commissioned to help in finding the extra space. The consultant can also advise on issues such as the allowable hours of operation and other similar matters.  

Likewise, if a new developer is building new, an architect in consultation with the planning adviser can provide advice about what can and can’t be achieved. Ultimately the development game aim is about maximising the net lettable area whether it’s an office or warehouse – and this maxim applies whether you would use the property yourself or are letting it out to other businesses. 

For example, the council might only allow for a height of six metres for a warehouse. However, with the help of a consultant, you might be able to have a crack at seven or eight. For an area of 500 square metres, this difference could mean space for another 500 pallets.  

There might also be some tax issues with converting residential to commercial space even if the area is zoned for this change. In SA, for example, there is no stamp duty charged on the purchase of a commercial property. Therefore, you need to try and alter the land-use code of the property with the consent of the current owner before you make the purchase. A planning consultant will be able to help with this approval process. For a property that sells for $1 million, this strategy will potentially save the buyer $70,000 if the current owner is prepared to wait. 

For more information about buying and developing a commercial property, contact your local Raine & Horne Commercial office today.