In Auckland’s industrial heartland of Onehunga, Penrose and Mt Wellington, Colliers International’s industrial leasing team offers real expertise in operating on both sides of the landlord–tenant divide, helping tenants navigate the property market and finding new occupiers for landlords hungry to fill their space.
Colliers brokers Hamish West and Ben Herlihy – from the company’s specialist industrial sales and leasing team – are operating in an area that provides 46% of Auckland region’s industrial stock, over 4.4 million square metres of space.
This is an area they describe as attractive for a number of reasons. “Firstly, its exceptional, central location and good motorway access points place it within easy reach of most areas and markets of Auckland, including the airport,” says Ben Herlihy. Also, Onehunga has the biggest available patch of heavy industrial zoned land near the city. It is also close to a large residential population, providing both staff and customers base for the businesses.”
Market overview
Herlihy says that many tenants are very price sensitive at present. He says that prime rentals have yet to decline significantly, but due to the volume of B grade space on the market some landlords are prepared to lead the market down in terms of rentals rather than face an extended period of vacancy. This pricing variance can be as much as 30% over a three years lease term when incentives such as rent free and fitout contributions are included,” he says.
“We are seeing effectively two markets emerge in terms of rates being paid by tenants. Those tenants who are staying put or undergoing rent reviews are experiencing small rental hikes, while those going to the market and striking new leases can often achieve a significant reduction in lease cost,” he says. “All of these factors combine to make it the best time in a long time for a tenant to explore the market as some very sharp leasing deals are being struck from a tenant perspective.”
In this market, businesses are changing their lease structures, according to Herlihy. “In changing business circumstances, companies that manage their property needs well will find that they create more opportunities for efficiency, cost saving and growth.”
This is where the Colliers team can add value, according to Hamish West. “We are working to help match business strategy to property strategy. We are working for the deal, so both the landlord and tenant are happy.”
Herlihy and West believe that the section of the market covering warehouses between 1000m²-2000m² has been more active than most over the past 12 months.
At the moment, West says that there is currently a real shortage of high quality, available buildings in the 1,000m² to 2,000m² range. “We are seeing a fair amount of vacancy above 2,000m²,” he says, “but below that we are working with a growing group of tenants who are either growing or consolidating.”
“We are seeing increasing evidence of retail and trade businesses consolidating multiple Auckland operations back into one site to future proof their companies,” says Herlihy. “Also, medium sized manufacturing businesses are swallowing up smaller competitors and requiring new premises to house the amalgamated operation.”
Newtons
An example of how the team has been able to assist companies looking to lease or find tenants is the Newton Seed Company, a specialist seed importer and distributor, who relocated from Neilson Street, Onehunga, to nearby Gloucester Park Road.
According to Hamish West, owners John Tutt and his wife Sarah purchased the business several years ago and are taking it to the next level. “They are upgrading their premises, rebranding the business and products, creating an e-commerce website and a stronger customer experience.”
Newtons had occupied an old building in Neilson Street for the last twenty years. According to Hamish West, the company had come under some rental pressure from its landlord. “Newtons got in touch, saying that their landlord was looking to increase the rent by about 40%.”
West says that Newtons had spotted Colliers in Cubic, and also noted that the brokers had completed the lease of nearby 34 Galway St earlier in the year.
Once appointed on a Tenant Representation basis, Colliers helped Newton’s review their current lease documentation, which revealed that the opportunity to exit the lease did exist. Then came the challenge: they only had six weeks to get Newtons out of the building and find a new home.
“Using our tenant representation process, we helped Newton’s to navigate the industrial leasing market,” says West. “We didn’t have much time, but located 36 potential properties then quickly narrowed the list down to twelve, which were then inspected. From then we shortlisted down to three clear options. Newton’s ultimately settled on one of them, the ex-Mico Plumbing site in Gloucester Park Road. In six weeks, we were able to cover the market and secure Newton’s their premises of choice on favourable terms.”
“The new premises is hugely more efficient for us,” says Tutt. “The property has multiple roller doors and drive around access, which creates much greater efficiencies in the use of our warehouse. The move has enabled us to reduce our building footprint from 1,700m² to 1,000m² which has helped to future-proof the business, whilst providing a better business environment for staff and customers alike.”
Tutt says that the move has also led to a pick-up in business for Newtons. “Business is going great guns. The better profile and increased parking has lead to a 30% increase in our retail trade which far exceeded our expectations. ”
42 Lunn Avenue
A new opportunity at 42 Lunn Avenue, Mt Wellington, demonstrates the work Colliers is doing to assist landlords to find tenants through the Master Agency marketing process.
The property is a Trade and Distribution Mecca location. Featuring 588sqm of office/showroom and 1244sqm warehousing, the building is a great opportunity and is complete with high quality showroom and ample customer carparking.
“Of huge incentive to an incoming tenant is that it is under-rented by about $50,000 per annum, at $151,000 per annum, with the rent locked in for a further three years,” says Herlihy. “In addition, Crane Distribution Properties, part of the nationwide Crane NZ group, is the head tenant. As the company is consolidating one of the business acquisitions they have made, they do not require the building any more. Therefore any tenant could get a great deal, either on a sub lease or lease assignment basis.”
The building has been on the market since the beginning of September. As master agents, Colliers has been marketing the property to both potential users and the industrial broker network.
This is an approach that seems to be working. With the campaign due to close at the end of November, a number of parties have already indicated interest.
“There is a great opportunity here for a company to relocate to Lunn Ave at a discounted rental while they get their business established” says Herlihy, as he points out that the team is enjoying opportunities like this. “We are proving to landlords that we can secure good tenants on long leases within tight timeframes even in this market. Tenants also appreciate that we understand that the key thing for them is to save money, find better space and generate efficiencies that help them develop their businesses successfully.”
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