An architect specialising in conversions of commercial property into residential spaces has noted premises located in central business districts incorporating a hybrid usage model have been most popular among investors.
Place Studio founder and chief executive James Alexander-Hatziplis said one of the reasons the hybrid approach is proving more popular among investors is that not all commercial properties are suitable to be completely turned into residential premises.
“Some will be better as mixed-use buildings, buildings that house homes, co-working, semi-retail offerings such as food and beverage, boutique commercial – all in the same building,” Alexander-Hatziplis noted.
Hybrid properties can also provide the benefits of diversification within a single asset, which can guard against market falls the sector may experience, he pointed out.
He highlighted another advantage associated with this type of real estate.
“The commercial assets can come into the market faster, cheaper and with a higher yield. Pair this with the ability to sell off components of the building at a higher yield – typically 2.5 to 4.5 per cent for residential versus 5 to 7 per cent for commercial,” he said.
With regard to the characteristics of property conversions, he identified some elements investors should look for that will enhance the ability of the asset in question to generate yield.
“These yield-enhancing elements can include simplified construction methodology, design consideration around structure, waterproofing, facades and glazing. More robust buildings will ultimately cost less to maintain and hold their value for longer,” he observed.
“Other key yield-enhancing elements include good lighting, with natural light where possible. Solar panels are a must for most developments these days, along with battery storage, to improve the sustainability of the development and reduce costs. Considered apartment layouts including seamless flow of kitchen and living/dining room transitions, smart storage solutions and kitchen designs are also essential.”
He acknowledged buildings that are more aesthetically pleasing when seen from the street will have greater return potential as will premises that are easy to maintain.
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