Industrial Property Sales – The Importance of the Liquidity Factor

 

When you work in industrial property sales there is a thing called the ‘liquidity’ factor.  It is quite relevant to the property type and has an impact on the marketing campaign that you will need to create and run.  A high ‘non-liquidity’ factor could radically change the way you market and sell a property.

Meaning?

So what does ‘liquidity’ and ‘non-liquidity’ mean?  It is the ability to move the property and sell it.  Depending on the property this may be easy or difficult.  A lot depends on the industrial property size and uniqueness.

  1. A property with a high ‘non-liquidity’ factor will be difficult to move and sell.  There will be clear reasons why this is so.  The property will be so unique in size and type that it will attract only a small number of buyers.  The risk that the property presents will limit buyer interest.
  2. A property with a high ‘liquidity’ factor will be easy to sell.  This industrial property would be ‘main-stream’ in size and highly flexible in usage.  From an investors perspective there will be low risk.

So the more specialised the industrial property in design, size, and usage, the more difficult it will be to sell.  This is a common factor in industrial property given the way the property is designed or used.

An example may be a ‘cold store’ industrial property that is leased as an investment to a tenant for a long period of time.  Whilst the lease may be attractive to an investor from a cash flow perspective, the uniqueness of the property could scare off many investors if and when the property comes up for sale.

Assessment?

So the ‘liquidity’ factor is something that you assess in setting up the marketing of the property, as well as pricing the property.  If the property is likely to be very difficult to sell, it may be better to market the property confidentially and directly to specific companies and investors that have a special interest in that property type or location.  A property with a high ‘non-liquidity’ factor will likely be difficult to price, understanding that there will be few comparable properties to establish a pricing benchmark.

Recommendation

As part of establishing a price and marketing plan for the property, do a ‘liquidity assessment’ for the client.  It will be a point of difference in your agency service and may even be a trigger for gaining the listing appointment.