Residual stock loans for unsold warehouse, factory and office units

Yes, you can refinance unsold warehouse, factory or office units into a residual stock loan once the project is complete. The loan repays the construction lender and gives you time to sell. The difference from an apartment project is the buyer: business owners, investors and super funds buy more slowly and more carefully, so the facility has to be built around a longer sell-down.

Here’s how lenders look at commercial stock, and how to set the deal up so it works for the whole sell-down rather than just the first few months.

Why is commercial stock different from residential stock?

Developers who’ve done both will tell you the selling feels completely different.

An apartment buyer is often buying a home, on an emotional timeline, with a pre-approved loan. A buyer for a 250-square-metre warehouse unit is usually a business owner whose lease is ending in nine months, who needs to check zoning, power supply and truck access, and who may be buying through a separate entity with their accountant’s blessing. The government’s business location guide tells buyers to check zoning, permits and future development with council before committing. That’s good advice for them, and it adds weeks to your sales cycle.

So a residual stock loan on commercial units needs a term that reflects how business buyers really behave, not how the original feasibility hoped they would.

How do lenders value and size unsold commercial units?

Lenders start with the value of each unit, then look hard at how quickly the remaining units are likely to sell. Things that move the needle on commercial stock:

Factor	What lenders like	What makes them cautious
Unit size	Sizes that suit many trades and small businesses	Very small units or one very large unit
Access	Roller doors, clearance and turning space for trucks	Tight driveways, shared loading with conflicts
Services	Three-phase power, amenities, mezzanine options	Limited power or no amenities
Parking	Allocated spaces per unit	Little or no parking
Estate sales	Several recent settlements at similar prices	No sales since completion
Number left	A handful of units in a busy estate	Many units in a thin regional market

Valuers look at recent sales in the estate and nearby. If you sold the first units at launch prices but haven’t sold any since completion, expect the lender to ask why, and to lend against a value supported by evidence rather than your price list.

Who buys the last commercial units, and how does their finance affect you?

Knowing your likely buyer helps you set a realistic term, because each group arrives with its own approval process.

• Owner-occupier businesses. Plumbers, electricians, joiners, online retailers and small manufacturers wanting to stop paying rent. Most need a loan of their own, and their lender will usually want a valuation and the business’s financials. Allow time for that.
• Self-managed super funds. Popular buyers of small commercial units, but borrowing inside super has its own rules and paperwork, so these settlements rarely happen quickly.
• Private investors. Often keen on units with a tenant already in place, and focused on the rent and the lease term.
• Neighbours in the estate. An owner who has outgrown one unit may buy the one next door. It’s worth a letterbox drop before you pay for a big campaign.

None of these buyers is slow by nature, but almost all of them depend on someone else’s approval. Build that into the loan term and you avoid an awkward extension request later.

How does GST work when you sell commercial units?

This is where commercial stock departs most clearly from apartments.

For new residential premises, the buyer generally withholds GST at settlement and pays it straight to the ATO. The ATO’s GST at settlement page lists commercial property among the sales those withholding rules don’t apply to. In practice, when you sell a new commercial unit, you’ll normally receive the whole price at settlement and then account for the GST on your own activity statement.

That has two consequences for your loan:

1. Release prices. The cash that lands at settlement includes GST you’ll later pay to the ATO. Set your release prices so you’re not left without the money to cover that GST when your BAS is due.
2. Going concern sales. If a unit is leased when you sell it, the sale may qualify as a GST-free going concern if the ATO’s conditions are met, including written agreement and a GST-registered buyer. That changes the numbers on both sides.

Your accountant should map out the GST on each likely sale before the lender sets release prices, not after.

Should you lease unsold units while you sell?

With commercial stock, leasing is often a genuine selling tool rather than a last resort.

For investor buyers, a unit with a signed lease to a reasonable tenant is a ready-made investment. Many self-managed super funds and private investors prefer it.

For owner-occupier buyers, a lease is a problem unless it ends around when they need to move in.

A sensible approach is to decide unit by unit. The smaller, more generic units might be leased and marketed to investors; the larger or better-located units kept vacant for occupiers. Your residual stock lender will usually need to consent to any lease, so take the plan to them early. If you’re weighing up leases on residential stock instead, see our guide to renting out unsold units, because the GST treatment of residential rent is quite different.

If you’ve got finished commercial stock and a construction lender asking for its money, tell us about the estate and we’ll look at what it could support.

What holding costs should you budget for?

Commercial stock carries the same kinds of holding costs as any property, but a few bite harder:

• Strata levies, which can be significant on estates with shared driveways, gates and fire services.
• Council rates and water, charged whether the unit is occupied or not.
• Insurance, including the building policy through the owners corporation.
• Land tax. Commercial land isn’t covered by the principal residence exemption. In NSW, land tax is based on the land you own at midnight on 31 December and isn’t reduced for part-year ownership, so stock held over New Year counts for the whole year.
• Marketing and agent fees, which often run longer on commercial campaigns.

Illustrative example: nine units, four left

Illustrative only. A developer completes a strata industrial estate of nine units in a growth corridor. Five units sell to owner-occupiers by completion. Four remain, each worth roughly $650k, and $1.4m is still owing to the construction lender, which wants out within 60 days.

A residual stock loan over the four units repays the construction lender, with interest prepaid for 12 months. The lender sets release prices with the GST on each sale in mind, so the developer keeps enough cash to meet its activity statement obligations as units settle.

The developer leases the smallest unit to a local fit-out business on a two-year lease and markets it to investors. The other three stay vacant for owner-occupiers. Two sell to tradespeople within five months, the leased unit sells to an investor in month seven, and the last unit sells in month ten. Each sale reduces the loan, and the final settlement clears it.

A checklist before you apply

• Unit schedule: sizes, sale prices achieved and asking prices for the rest
• Evidence of recent sales in the estate and nearby
• Construction loan payout figure and the lender’s deadline
• Strata plan registration, occupation certificate and defects status
• Any leases in place or proposed
• Your agent’s marketing plan and expected timeframe
• Your accountant’s notes on GST for each likely sale

The full list lenders work from is in our residual stock loan documents guide. If you’re also holding a finished building for your own business, commercial property loans cover owner-occupied premises.

Built the estate, still selling the units? Start here

You took the risk, delivered the project and sold most of it. The last few units shouldn’t have to go cheap just because the construction lender’s timetable doesn’t suit business buyers. If you’d like to see whether your remaining stock supports a property-secured facility, between $20k and $5m, we can help.

It takes around 60 seconds to enquire, and there’s no credit check when you first enquire. We won’t send your details to a pile of lenders, so you won’t be chased by a string of strangers. A real person looks at the estate, the units left and your timeline, then calls you. Please be accurate about values, what’s owing and any leases, because those numbers decide which lender is the right match first time.

Find out what your remaining units can support →