Industrial businesses are increasingly hungry to own their own premises, in the wake of Covid-19 and continuing low interest rates.
Sam Staite, director of industrial sales and leasing with Colliers International, says the owner occupier market is still extremely active, adding to the already buoyant industrial property investment scene.
“It’s no secret that industrial property has been performing especially strongly throughout New Zealand and nowhere more so than in Christchurch. The owner occupier market is particularly interesting. In the past week, we’ve negotiated four sales to owner operators, ranging in price from $560,000 through to $4.1 million. While there are some casualties from the lockdown, a lot of industries are doing really well.
“We’re finding that during Covid, a significant number of owner occupiers have been considering their options and are now wanting to buy their own premises – the trouble is there’s very little stock available. With some industries downsizing we are starting to see a few more vacant properties, which is positive for the occupier market.”
Industrial sales broker Ben Dwan says demand is being fuelled by a willingness from banks to fund the purchase of many industrial properties.
“Businesses are looking to save costs wherever possible. Owner occupiers can effectively halve their property operating costs by owning their own premises rather than leasing. We’re seeing a real benefit in reducing interest rates; tenants are now looking at their lease costs and asking themselves why they’re paying an investor six to seven per cent when they could loan the money at three to four per cent.”
A prime example of the type of property owner occupiers are seeking is a 2981sqm warehouse on 6500sqm of land at 127 Waterloo Road in Hornby. The building, which is currently occupied by DHL, has had significant refurbishment works and is coming vacant early 2020, opening the opportunity for both owner occupiers and investors to secure a desirable asset in a sought after area.
For sale by deadline private treaty, closing June 30, the site is under-utilised and the surplus land will suit those with large storage and unloading requirements, Dwan says.
He expects the scarcity of available warehouse space to continue.
“Christchurch is well-insulated from the current events with a large portion of our industrial market being somewhat agri-reliant and we also have a strong essential services sector.”
According to figures from ChristchurchNZ, approximately 123,800 people (2019) are employed in the essential services, as recently defined during the Covid-19 lockdown. This represents 40.6 per cent of all employment within the region.
Food production and processing services are of particular importance, with a share of 24 per cent of essential services employment in Canterbury and as a large exporter of goods amounting to $6.7 billion or 66 percent of all exports in 2019 for the region. In Waimate and Hurunui, which both have strong food production and processing activities, the number of people employed in essential services is at 73 per cent and 68 per cent respectively.
Dwan says against this backdrop, he expects the scarcity of available quality warehouse space to continue as these types of essential industries grow.