Will DA approval on commercial property achieve a higher sale price?

“Should we seek development approval before trying to sell our commercial property?” We’re asked this question often and the answer is, “Maybe” because everything depends on the site and its potential.

Selling a commercial property with a development application (DA) approved can significantly affect its value compared to selling without DA or council approval. We’ll go into key factors but what we need to think about is getting the most value for effort expended. Hint: This isn’t always getting DA approval.

One of the better options for achieving higher value is to amalgamate some sites. We’ll go through some ‘what ifs’ further in this article.

Pros of getting DA approvals

Here’s a breakdown of the key factors that might increase value with DA approval:

• Reduced risk for buyers: A DA approval signals that the proposed development aligns with local regulations, reducing the buyer’s risk of rejection and saving them time and resources in obtaining approvals.
• Wider pool of buyers: Developers and investors are more likely to be interested in a property with existing approvals, expanding your potential buyer base.
• Time savings: Buyers can immediately proceed with the development, accelerating their project timeline and potentially generating faster returns.
• Clear development potential: The approved DA provides a clear picture of the property’s development potential, attracting buyers specifically seeking that type of project and location.
• Premium price: Due to reduced risk and time savings, buyers are often willing to pay a premium for properties with DA approval, potentially increasing the selling price.

If your Sydney City Fringe commercial property isn’t in a desirable location or there isn’t scope for development, then there is no reason to go through the DA process.

Factors to consider before seeking DA and approvals

• Location: The property’s location and the area zoning play a vital role in determining its value and development potential. On the Sydney City Fringe, we’re seeing more interest in properties near transport hubs and potential hubs (should the light rail be extended along Parramatta Road).
• Market conditions: Prevailing market conditions are critical in determining its value, regardless of DA status.
• DA specifics: The specifics of the DA approval ‒ such as the type and scale of development ‒ can influence its value.
• Certificate of title and restrictions: It’s vital to begin with obtaining a certificate of title for your property to find out if there are restrictions on all or part of the land and buildings. To give an example: For one property where owners were considering selling for redevelopment, we found the City of Sydney council holds a lease over part of the property with access rights to an electricity substation. The lease expires in 2034 and will most likely be extended at that time. This makes redevelopment of the property unlikely.
• Buyer demand: The demand for properties with specific DA approvals can have an impact on the selling price.
• Time and money: If site amalgamation and DA approvals are part of your exit strategy, you need to allow for delays. The process of possible rezoning, site amalgamation and DA approval can take two to three years and the process can be costly.

Site amalgamation and DA approval examples

If you’re still keen, due diligence, site amalgamation, a vision and DA approvals can lead to a higher price than you might achieve for individual properties. Here are some ‘what if’ scenarios to consider.

1. Retail and mixed use
Two adjacent, older retail buildings in a prime location.
Individually, they might have limited appeal and potential. However, by amalgamating the two buildings and securing DA approval for a modern, mixed-use development with street-level retail and residential apartments above, the combined property becomes vastly more attractive to developers. This allows for a larger, more efficient building footprint, potentially increasing the overall floor space, usage possibilities, and value.

2. Office:
Two smaller and outdated office buildings in a business district.
By amalgamating the two sites and obtaining DA approval for a larger, more contemporary office tower, the combined property becomes more desirable to larger companies seeking modern office space.

3. Industrial
Two adjacent industrial sites with older warehouses.
Amalgamating them and securing DA approval for a larger, state-of-the-art logistics facility will deliver a combined property that becomes more appealing to logistics companies seeking more efficient distribution centres.

While these are general examples, they illustrate the significant potential for increased value when amalgamating adjacent commercial properties and obtaining design and DA approval. It’s crucial to conduct thorough research, consult with real estate professionals and carefully analyse the potential benefits and costs before pursuing such a strategy.

Why seek professional advice?

We recommend you always consult with a real estate agent and a planning expert to assess the potential value of development approvals for your specific property. We can advise as to whether or not it would be worthwhile to spend the time and money on trying to add value to your property. In most cases, a few cost-effective cosmetic improvements will deliver additional value but less expensively and in a shorter time frame.

Let us help you with your commercial property

As dedicated local commercial real estate agents, we can help you extract more value from your commercial property. Please get in touch to discuss your circumstances and assets so we can give you personalised advice. Whether it’s commercial leasing, management or sales, we’re here to help you with your Sydney-based commercial property.

Contact us at Ray White Commercial Sydney City Fringe