Unlock the secrets to financing a logistics hub

Financing a logistics hub requires a different approach to standard commercial property loans

A logistics hub purchase typically involves larger loan amounts, multiple income streams, and lender assessment criteria that go beyond standard warehouse financing. The facility might generate revenue from warehousing tenants, distribution operations, or your own business activities, and lenders will want to understand each component before approving finance.

Melbourne's industrial property market has seen sustained demand in growth corridors like Truganina, Dandenong South, and Epping, where logistics hubs serve the distribution needs of businesses across the eastern seaboard. These facilities often come with higher price points than single-tenant warehouses, and the lending structure needs to reflect both the property value and the operational complexity.

Consider a transport business acquiring a 5,000-square-metre logistics facility in Truganina. The property includes cold storage, warehouse space, and an office component, with two external tenants occupying 40% of the building. The lender will assess the business's operational income, the lease agreements for tenanted space, and the overall debt servicing capacity before determining loan amount and structure.

What loan structure works for a multi-use logistics facility?

Most lenders will offer a commercial property loan structured as a principal and interest facility with a loan term of 15 to 25 years. The loan amount is typically capped at 70% of the property valuation, though some lenders will extend to 80% if the borrower has strong financials and the facility is in a high-demand location.

The interest rate structure will depend on your preference for certainty versus flexibility. A fixed interest rate locks in repayments for one to five years, which can provide stability during the early years of ownership when cashflow from tenants is being established. A variable interest rate offers more flexibility if you plan to make additional repayments or if the facility will generate uneven income during fit-out or expansion phases.

In the Truganina example, the borrower secured a 70% LVR facility with a 20-year loan term. The lender required financial statements for the transport business, lease agreements for the tenanted space, and a commercial property valuation that reflected both the operational and investment components of the facility. The loan structure included a variable interest rate with redraw, allowing the business to access surplus funds if expansion opportunities arose.

How do lenders assess income from a logistics hub?

Lenders will calculate debt servicing capacity using a combination of business income, rental income from tenants, and personal income if the borrower is a director or guarantor. Each income source is weighted differently depending on the strength and documentation provided.

Rental income from tenanted space is typically assessed at 70% to 80% of the actual lease amount, with the lender applying a discount to account for vacancy risk. Business income is assessed using tax returns, profit and loss statements, and BAS statements, and lenders will apply a loading rate to determine serviceability. If the logistics hub will be owner-occupied with no external tenants, the lender relies entirely on business income and may require a longer trading history or higher deposit.

For logistics facilities in Melbourne's outer industrial zones, lenders also consider the property's location and tenant profile. A facility in Dandenong South with long-term tenants in logistics or manufacturing will be viewed more favourably than a facility in a secondary location with short-term leases. The commercial property valuation will reflect these factors, and the loan amount will be capped accordingly.

What deposit and upfront costs should you expect?

A 30% deposit is standard for most commercial property loans at 70% LVR, though some borrowers will aim for 80% LVR if they have strong financials or are using equity from other properties. The deposit must come from genuine savings, business reserves, or equity, and lenders will require proof of funds before proceeding.

Upfront costs include legal fees for contract review and settlement, commercial property valuation fees, and lender establishment fees. For a logistics hub purchase, you should also budget for due diligence costs such as building inspections, environmental assessments, and lease audits if the property has existing tenants. These costs typically add another 3% to 5% to the total upfront outlay.

If the logistics hub requires fit-out or expansion work after settlement, you may need to structure the loan as a commercial construction loan with progressive drawdown. This allows you to access funds as works are completed, rather than borrowing the full amount upfront and paying interest on capital you're not yet using.

How does commercial property valuation affect your loan amount?

The commercial property valuation determines the maximum loan amount available and is based on both the income the property generates and comparable sales in the area. For a logistics hub, the valuer will assess the quality of tenants, lease terms, building condition, and location factors such as access to transport routes and proximity to distribution networks.

A facility in Epping with direct access to the Hume Highway and long-term tenants in freight and warehousing will typically achieve a higher valuation than a similar facility in a less accessible location. The valuer will also consider the property's potential for expansion or subdivision, which can influence the valuation if future development is part of your business plan.

Lenders will use the lower of the purchase price or the valuation to calculate LVR, so if the valuation comes in under the agreed purchase price, you'll need to increase your deposit to meet the lender's LVR requirements. This is more common in competitive industrial markets where buyers are paying a premium for well-located logistics facilities.

Can you use equity from other properties to fund the deposit?

You can use equity from residential or commercial properties to fund part or all of the deposit, provided the combined loan to value ratio across all securities remains within the lender's limits. This approach is common when buyers want to preserve business capital or when the logistics hub purchase is part of a broader expansion strategy.

The lender will value each property being used as security and calculate the total borrowing capacity based on the combined equity position. If you're using residential property as security for a commercial property loan, the lender may apply different LVR limits to each asset, and you'll need to consider the implications for your personal financial position if business income fluctuates.

What happens if the logistics hub needs immediate capital works?

If the facility requires urgent repairs, compliance upgrades, or fit-out work before it can be fully operational, you may need to structure the loan to include a capital works component. Some lenders will allow a small contingency within the standard loan amount, while others will require a separate construction facility with progressive drawdown linked to builder invoices and progress certificates.

For significant works, a staged loan structure allows you to borrow the purchase amount at settlement and draw down additional funds as works are completed. This keeps interest costs lower during the construction phase and ensures you're only paying for capital as it's deployed. The lender will require a quantity surveyor's report or builder's quote before approving the additional drawdown component.

How does your business structure affect loan approval?

Lenders will assess loan applications differently depending on whether the logistics hub is being purchased by an individual, a company, a trust, or a self-managed super fund. Each structure has different tax implications, asset protection considerations, and lender requirements.

If the property is being purchased by a company, the lender will require company financials, director guarantees, and details of any related-party transactions. If the purchase is being made through an SMSF, you'll need to work with a lender experienced in SMSF loans, and the loan structure must comply with superannuation law, including restrictions on related-party use and contribution limits.

Most logistics hub purchases in Melbourne are structured through a company or trust to separate business operations from personal assets, and lenders are familiar with these arrangements. The key requirement is consistent documentation and clear financials that demonstrate debt servicing capacity under the chosen structure.

Acquiring a logistics facility is a significant investment that requires careful structuring and lender selection. Each facility presents different income streams, operational requirements, and growth potential, and the loan structure should reflect those factors. Working with a commercial finance broker who understands industrial property in Melbourne ensures you're comparing loan options from lenders with experience in logistics and warehouse financing. Call one of our team or book an appointment at a time that works for you.

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