Setting Aside Contingency Funds for Vacancies in Industrial Property

Industrial property is often seen as stable and predictable. Warehouses, factories, and logistics facilities usually have longer leases and lower tenant turnover than residential assets. But vacancies still happen. When they do, the financial impact can be significant.

Setting aside contingency funds for vacancies is one of the most important disciplines for industrial property investors. It protects cash flow, reduces stress, and allows you to hold assets through market cycles.

This blog explains why vacancy buffers matter, how much to set aside, and how to build them into your industrial property strategy.

Why Vacancies Matter in Industrial Property

Industrial leases are longer, but when a tenant leaves, the gap can be longer too.

Unlike residential property, industrial vacancies may involve:

• Longer re-leasing periods
• Higher marketing and incentive costs
• Fit-out or make-good delays
• Reduced demand in softer markets

A single vacancy can wipe out months of income if you are not prepared.

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Common Causes of Industrial Vacancies

Vacancies are not always a sign of poor asset quality. Many are driven by external factors.

Common causes include:

• Tenant business failure
• Relocation or consolidation
• Lease expiry without renewal
• Changes in logistics or supply chains
• Economic downturns
• Zoning or compliance changes

Planning for vacancies means accepting that they are part of the investment cycle.

The Real Cost of an Industrial Vacancy

Vacancy costs go beyond lost rent.

You may still need to cover:

• Loan repayments
• Council rates
• Land tax
• Insurance
• Strata fees if applicable
• Security and basic maintenance

In addition, you may face:

• Leasing agent fees
• Incentives such as rent-free periods
• Refurbishment or compliance upgrades

Without a contingency fund, these costs come directly out of personal or business cash flow.

How Much Contingency Should You Set Aside?

There is no one-size-fits-all number, but practical benchmarks help.

Many industrial investors aim for:

• Six to twelve months of net property expenses
• A minimum of 10 to 15 percent of annual gross rent
• Separate buffers for each asset, not one shared pool

Assets with single tenants or specialised use should have larger buffers.

Where to Hold Your Vacancy Contingency Funds

Accessibility matters more than return.

Good options include:

• Offset accounts linked to industrial loans
• High-interest business savings accounts
• Dedicated contingency accounts per property
• Accounts with no card access

Avoid tying vacancy funds into long-term or illiquid investments.

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Building Vacancy Buffers Over Time

You do not need to fund everything upfront.

Strong investors build buffers gradually.

Allocate Part of Rental Income

Treat vacancy funding as a cost of ownership.

Each month, allocate a portion of rent into your contingency account. Over time, this builds a meaningful safety net.

Use Lease Renewals Strategically

When rents increase at review or renewal, consider directing part of the uplift into your vacancy buffer instead of lifestyle or distribution increases.

Top Up After Vacancies

Once a vacancy is filled, rebuild the buffer immediately. Do not assume the risk has passed.

Vacancy Risk and Single-Tenant Industrial Assets

Single-tenant industrial properties are common. They also carry concentrated risk.

If the tenant leaves, income drops to zero.

For these assets:

• Increase buffer targets
• Stress test cash flow at zero rent
• Understand tenant business health
• Track lease expiry well in advance

Preparation matters more than optimism.

How Coposit Supports Smarter Vacancy Planning

One challenge for industrial investors is tying up too much capital at purchase.

Coposit offers a more flexible way to enter property ownership.

Instead of requiring a large traditional deposit, Coposit allows buyers to secure property with a smaller initial amount and structured weekly payments.

This flexibility helps investors:

• Preserve cash for vacancy buffers
• Avoid draining liquidity at acquisition
• Maintain contingency funds post-purchase
• Manage vacancies without financial pressure
• Align ownership with real cash flow

In industrial property, liquidity is protection.

Common Mistakes Investors Make With Vacancy Funds

Even experienced investors make errors.

Avoid these mistakes:

• Assuming long leases mean no vacancy risk
• Using contingency funds for non-essential spending
• Relying solely on redraw facilities
• Underestimating re-leasing timeframes
• Sharing one buffer across multiple assets

Buffers only work if they are respected.

Vacancy Planning as a Competitive Advantage

Most forced sales happen during vacancies, not downturns.

Investors with strong contingency funds can:

• Hold assets longer
• Negotiate better lease terms
• Avoid distressed decisions
• Maintain lender confidence
• Capitalise on recovery periods

Vacancy planning creates resilience.

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Building a Resilient Industrial Property Portfolio

Setting aside contingency funds for vacancies is not conservative. It is strategic.

Industrial property rewards investors who plan for gaps, not just income. When vacancy funds are built into your model, uncertainty becomes manageable.

Strong buffers turn vacancies into inconvenience rather than crisis. In industrial property, that difference defines long-term success.