Industrial Yield: What Makes It Cashflow Positive?

By Vineet Danwar, Founder, TransformBiz — ex-PwC, Deloitte, Protiviti; 20+ years in corporate finance, banking and business structuring.

An industrial property advertised at a 9% yield looks like an easy decision. The return comfortably beats the cost of most commercial debt, the numbers fit neatly on a single page, and the temptation is to treat the headline figure as the whole story.

It rarely is. Yield tells you what a property earns relative to its price. It doesn't tell you what happens once the loan repayments, the outgoings and the occasional empty month are taken out of that number. Two properties can show an identical yield and leave their owners in very different financial positions.

Before you commit to an industrial acquisition on the strength of its yield, it's worth understanding exactly what sits behind that number, and what actually determines whether the property puts money in your pocket each month or quietly takes it out.

Same 9% Yield, Two Very Different Outcomes

Consider two industrial properties, both advertised at a 9% yield:

• Lease type — Property A: net (tenant covers outgoings) · Property B: gross (landlord covers outgoings)
• Annual outgoings to owner — Property A: $0 · Property B: $18,000
• Lease term remaining — Property A: 6 years · Property B: 8 months
• Income available to owner — Property A: ~$180,000 · Property B: ~$162,000, before costs
• Vacancy risk this year — Property A: low · Property B: high

The headline yield is identical. The cashflow is not. Property A's owner collects the rent while the tenant covers the outgoings, with six years of lease still to run. Property B's owner wears $18,000 of outgoings before they see a dollar, and faces a realistic chance of vacancy within the year — with the re-leasing costs and empty months that come with it.

Once loan repayments are layered on top, the gap widens further. The property that looked just as rewarding on the advertisement can quietly turn cashflow negative, while the other pays for itself. That is why the lease structure, the outgoings and the time left on the lease matter as much as the yield figure itself.

Yield Is the Advertisement, Cashflow Is the Reality

A yield is a snapshot: income divided by price, on the assumption that the income keeps arriving. Cashflow is what remains after the property's real costs — outgoings the lease doesn't pass on, months without a tenant, and the debt service on the loan you used to buy it.

This is why two investors can buy properties at the same yield and end up in very different positions. The difference is rarely the yield itself. It is the lease behind it, the costs attached to it, and the way the purchase was financed.

At TransformBiz, that's the conversation worth having before any industrial acquisition: not just what the yield looks like today, but what the cashflow genuinely looks like once the loan is structured and the property is actually operating.

If you're assessing an industrial purchase or reviewing an existing facility, start a conversation with TransformBiz to work through the numbers properly before you commit. Our commercial finance team structures the lending side of that purchase around the real cashflow, not the headline yield.

This article provides general information about Australian commercial property finance. It does not consider your objectives, financial situation or needs and is not financial, credit, tax or legal advice. Lending criteria, LVR limits, pricing and approval conditions vary by lender and individual circumstances. All lending is subject to assessment and approval. Obtain appropriate professional advice before acting.

Frequently Asked Questions

Is a high yield always a sign of a good industrial investment? No. Yield reflects income relative to price. It does not by itself show how reliable that income is, what outgoings sit behind it, or what the property looks like once a tenant eventually leaves.

What yield should I look for on an industrial property? There is no fixed benchmark, and the right figure depends on the location, the tenant, the lease terms and current lending costs. A lower yield with a strong, long-term tenant can be a safer outcome than a higher yield with weaker lease security.

Does a net lease always mean better cashflow? Usually, though not automatically. A net lease shifts outgoings to the tenant, which generally helps cashflow, but the tenant's ability to keep paying those costs over time still matters. The lease structure helps only if the tenant behind it is sound.

How much of a vacancy allowance should I build in? This varies by location and asset type, and is worth discussing with a local agent or adviser familiar with that market. The point is not to land on one perfect number, but to avoid assuming the space will never sit empty between tenants.