Understanding the Basics of Logistics Hub Loans

What Lenders Look For in a Logistics Property Purchase

Lenders assess logistics hubs on income, location, and tenant quality rather than treating them as standard commercial buildings. A warehouse in South Melbourne with an established tenant on a long lease will access different loan structures and rates than a vacant facility or one requiring subdivision.

Consider a buyer acquiring a 2,000 square metre distribution centre near Ferrars Street with a national courier company on a seven-year lease. The tenant covenant carries weight with most lenders. The property generates enough income to cover the proposed loan, and the location near CityLink and the Port of Melbourne makes it desirable for logistics operators. That combination allows for a loan structure at around 65% LVR with a variable interest rate tied to serviceability rather than speculative value.

The lender will order a commercial property valuation that considers comparable sales, lease terms, and tenant strength. Valuers in this area understand that proximity to transport routes and loading capacity matter more than street appeal. A facility with multiple dock doors, high clearance, and direct arterial access will value higher than a basic warehouse of the same size.

How Loan Structure Changes With Tenant Occupancy

Vacant logistics properties require higher deposits and different repayment terms. A facility with no tenant in place is assessed on potential rental income, which most lenders discount heavily until a lease is signed. That shifts the LVR down to 50% or 55%, and some lenders will ask for interest-only terms until tenancy is secured.

In our experience, buyers targeting a vacant property near South Melbourne Market or the Port Melbourne industrial precinct should factor in holding costs for three to six months while securing a tenant. That includes rates, insurance, and loan interest without rental income to offset it. Some lenders will allow for a higher LVR once a lease is executed, which can trigger a refinance within the first year.

If the property includes multiple tenancies or strata title, the structure becomes more involved. Lenders assess each lease individually and may reduce the overall borrowing capacity if one tenant represents more than 50% of the income. A logistics hub with three separate tenants on staggered lease terms will often access more flexible loan terms than a single-tenant facility, even if the combined income is identical.

Interest Rate Options and How They Apply to Industrial Property

Most commercial loans for logistics hubs are written on variable interest rates, though fixed terms are available for periods up to five years. Variable rates allow for additional repayments and refinancing without break costs, which matters if the property appreciates quickly or if rental income increases during the loan term.

Fixed rates lock in certainty but limit flexibility. A buyer who expects rental reviews or plans to subdivide the facility within three years will usually prefer a variable structure. Some lenders offer a split arrangement, fixing part of the loan while leaving the remainder variable. That approach suits buyers who want predictable repayments but also plan to reinvest surplus cashflow into the loan.

Rates themselves depend on the lender, the LVR, and the quality of the tenant. A logistics hub leased to a publicly listed company will access rates closer to residential investment lending than a facility leased to a startup with no trading history. The gap can be 1% or more, which compounds over a 15 or 20-year loan term.

What Happens If You Need to Refinance or Expand

Refinancing a logistics property is common once rental income increases or the property value rises. Buyers who purchase at 65% LVR and make regular repayments often find themselves at 55% or 50% within five years, which opens up access to improved rates or allows for equity release.

That equity can fund further acquisitions or development finance if the buyer plans to subdivide or add to the existing facility. South Melbourne has limited industrial land, so expansion opportunities are rare. Most buyers look to refinance and use released equity to purchase a second property in nearby areas like Port Melbourne, Fishermans Bend, or further south in Moorabbin.

If the property is held within a company or trust structure, refinancing can involve additional documentation around directors' guarantees and company financials. Lenders will reassess the tenant lease at that point, so a tenant nearing the end of their term or flagging nonrenewal will affect the refinance outcome. Securing a lease extension before approaching lenders usually improves the terms available.

Deposit Requirements and Where the Funds Need to Come From

Most lenders require a 30% to 35% deposit for a logistics hub purchase, though some will reduce that to 25% if the tenant and lease terms are strong. The deposit must come from genuine savings, business equity, or property equity. Lenders do not accept gifted funds or unsecured loans as part of the deposit.

Buyers using equity from an existing property will need a valuation on that asset before the lender confirms the available funds. If the existing property is residential, the lender may treat it as cross-collateralised security, which ties the two properties together until one is sold or refinanced. That structure reduces flexibility but allows for a lower deposit contribution.

Some buyers will use bridging loans to cover the deposit while arranging the sale of another asset. That approach works if the sale is expected within six months and the buyer has a clear exit strategy. Bridging finance carries higher rates and short terms, so it is not a holding strategy.

How Settlement Costs Add to the Total Outlay

Settlement on a logistics property includes stamp duty, legal fees, valuation costs, and lender establishment fees. Stamp duty in Victoria for commercial property is calculated on the purchase price without the concessions available to residential buyers, so it represents a significant portion of the upfront cost.

Legal fees for commercial transactions are higher than residential due to the lease review, tenant documentation, and title complexity. Buyers should allow for several thousand dollars in legal costs, particularly if the property includes multiple tenancies or shared access arrangements with neighbouring lots.

Lender fees vary but typically include an application fee, valuation fee, and settlement fee. Some lenders will capitalise these costs into the loan, though that increases the loan amount and reduces the effective equity in the property. Buyers with sufficient cash reserves usually pay these costs upfront to maximise their equity position from day one.

Why Location in South Melbourne Affects Loan Terms

South Melbourne sits between the CBD and the Port of Melbourne, which makes it a preferred location for logistics operators. Lenders recognise that demand for industrial space in this area remains strong, even as other parts of Melbourne see higher vacancy rates.

Proximities to CityLink, the West Gate Freeway, and Lorimer Street create access advantages that translate into higher rental yields and lower vacancy risk. A logistics hub in this precinct will generally access better loan terms than an equivalent facility further out in the southeast or western suburbs, even if the property specifications are identical.

The shift toward mixed-use development in parts of South Melbourne has reduced the availability of industrial sites, which supports property values over time. Lenders factor that scarcity into their risk assessment, which can result in higher LVR options or improved rates for well-located properties.

When to Speak With a Broker About Your Purchase

Speaking with a commercial finance broker before making an offer gives you a clear view of what loan amount and structure you can access. That avoids the situation where a buyer signs a contract only to discover that the lender will not approve the proposed loan due to tenant concerns, valuation shortfalls, or deposit structure issues.

A broker with experience in logistics properties will know which lenders are currently active in this space and which ones have appetite for South Melbourne assets. Some lenders treat logistics hubs as specialised industrial, while others group them with general commercial property. That distinction affects approval timeframes, rates, and loan terms.

Call one of our team or book an appointment at a time that works for you. We work through the numbers, structure options, and lender fit before you commit to a purchase.

Frequently Asked Questions