How do you sell an industrial building to an owner-occupier?

Who buys industrial buildings to occupy them?

Mostly established small and mid-sized businesses. Manufacturers and engineering workshops, wholesalers and distributors, trade suppliers, builders and contractors, transport operators, food producers and cold storage operators all buy their own premises once they are settled in an area and confident in their growth.

Their reasons are practical. Owning ends rent increases and the risk of a landlord not renewing. It lets them invest in specialised fit-out, such as cranes, three-phase power, mezzanines or refrigeration, without handing the value to a landlord at the end of a lease. It builds equity in the business. And it secures a site in an area where their staff and customers already are.

The likeliest buyers are often already close by, which is why marketing to local businesses works for a sale too: businesses leasing in the same estate or precinct, especially those with a lease ending in the next year or two, and your own tenant if the building is let. If it is let, consider offering it to the tenant first.

Should you sell with vacant possession or with a tenant in place?

Owner-occupiers need vacant possession, or a tenancy ending soon enough to fit their plans. An investor wants the opposite: a secure lease and income. Decide which buyer pool you are targeting before you set the timing, because a building with three years left on a lease is mostly an investor sale.

If the building is vacant or a lease is ending, the owner-occupier market is open to you, and it can be the stronger market for smaller buildings that suit a single business. If you occupy the building yourself and want to stay, a sale and leaseback to an investor is the alternative. If your tenant is the logical buyer, approach them early, before the lease end forces a decision either way.

How do owner-occupiers finance a purchase, and how does that affect timing?

Most use bank finance, so expect the sale contract to be conditional on finance and on the lender's valuation. In the United States, many small businesses use SBA 504 or SBA 7(a) loans, which allow a smaller deposit than a conventional commercial loan. The 504 programme requires the business to occupy most of the building, at least 51 percent for an existing building. In Australia, some business owners buy through a self-managed super fund and lease the property back to their business.

This affects your timeline. Allow for finance approval, valuation and due diligence periods before the contract goes unconditional, typically several weeks and sometimes longer for SBA loans. Having your documents ready, and a building that values well, shortens it. Ask early whether a buyer has spoken to their lender.

What should you prepare before marketing an industrial building for sale?

The facts a business needs to decide whether its operation fits: building and site area, office component, clear height, roller doors and docks, power capacity, hardstand and yard, parking, zoning and permitted uses, and any special features such as cranes or sprinklers. Add title details, outgoings, and any building, roof or environmental reports. In the United States, buyers and lenders commonly require a Phase I environmental site assessment.

Price against comparable sales of buildings bought to occupy, not only investment sales, because the two can differ. Decide the sale method: a private sale at a set price, an expressions of interest campaign, or an auction, which is common in Australia and New Zealand. A private sale gives owner-occupiers time to arrange finance, which often suits them better.

How do you find owner-occupier buyers who are not searching yet?

Owner-occupiers rarely browse listings continuously. A business decides to buy when its lease end approaches, when it outgrows its premises, or when growth makes owning worthwhile. If your sale happens to coincide with that moment, they may find it. Most of the time it will not, so you need to reach them.

Build a list of businesses whose operations suit the building, much as brokers prospect industrial owner occupiers: those leasing nearby in similar buildings, and businesses in the same industries across the market. Prioritise the ones showing signs of needing space, such as hiring, new contracts, expansion or a lease ending. Contact the owner, managing director or finance director at each with a short email about why the building suits their operation.

Scayled's The Campaign does this for one property, and for a sale it finds buyers: businesses that could buy and occupy the building, nearby tenants that may be ready to own their premises, and relevant investors where the asset suits a portfolio. It names and checks the decision-maker at each and writes every email. Focused covers the strongest 100 to 150 businesses from US$449 in about three working days, Full covers 250 to 350 for US$749 in about five, with We Send It For You available for US$299.

Should you use an agent to sell an industrial building?

Agents remain a good option. An industrial sales agent brings pricing evidence, investor and occupier networks, auction or tender experience, and negotiation, and is usually paid a commission based on the sale price. For larger buildings, or if you want the process managed end to end, that is often worth it.

If you sell privately, you will need a solicitor or conveyancer for the contract, and you take on the marketing, viewings and negotiation yourself. Either way, direct outreach to owner-occupiers can run alongside. If you appoint an agent, agree in writing how buyers you introduce are treated under the agency agreement, so there is no dispute over the fee.