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Purchasers ‘up the ante’ chasing heavily undersupplied Wellington industrial property

Purchasers up the ante chasing heavily undersupplied Wellington industrial property
Wellington’s industrial property sector is heating up as purchasers motivated by solid economic conditions, market sentiment and a low debt cost environment ‘up the ante’, according to brokers active in the region.

Tim Julian, associate director of industrial at Colliers Wellington, notes all types of industrial property are currently being targeted.

“Tenanted or vacant premises, brownfield redevelopments, greenfield land – it’s all up for consideration as people eye the positive economic conditions and the long-term demand and supply fundamentals in the Wellington market.

“While locals remain the key purchaser group, the comparably better returns on offer in comparison to the likes of Auckland, does stimulate enquiry from parties further afield.

“Perhaps the secret is getting out,” says Julian.

While industrial market yields in Auckland often range between the high 3% and 5.5% range, Wellington provides returns typically between the low 4% and 7.5% range, according to the latest Colliers research.

Julian says: “We recently sold three neighbouring properties at 14-16 Shakespeare Avenue in Trentham, Upper Hutt for just over $11 million with a return on the passing income of around 5.4%, but a market yield was assessed at 7.7%.

“The three neighbouring properties on a combined land area of 14,825 sqm and a total building area of approximately 6,276 sqm were hotly contested and ultimately sold to a local investor.

“Interested parties were attracted by the properties’ land large holding, handy location to State Highway 2, split-risk income profile given the six tenants occupying space across five buildings, the short weighted average lease term and the under-renting apparent.”

“The campaign epitomised how the limited number of premises released to market is generating high levels of competition and the low interest rate environment ‘ups the ante’.

Julian, alongside colleague Kieran Lennon, marketed another property at 14-26 William Durant Drive at the same time and for the same vendor – it sold before marketing material could be put together.

Lennon notes: “The property sold for $9.8 million, reflecting a 4.0% yield on passing income and 6.0% on a market yield basis.”

“But, its not just investors, owner occupiers have also been active in the market, as trying to lease premises remains a challenge,” says Lennon.

According to the latest research from Colliers, Wellington’s industrial vacancy rate has increased from record lows over 2020 but have only risen to 2.4%. This places vacancy well below the 10-year average of 4.4%.

“While some cautiousness from industrial occupiers is apparent given Covid disruption, there is a limited number of alternative options for tenants to consider. This leads to a number of shorter leases which are continually rolled over.

“With industrial property vacancy rates at record lows coupled with a stronger than expected economic recovery and a real scarcity of property on offer, the appetite to secure industrial properties in Wellington will continue,” says Julian.

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Tim Julian

Associate Director

Wellington (Agency)

Tim’s areas of expertise are:

•    Hutt Valley and Industrial sales and leasing

•       Negotiation

•       Development

•       Documentation

•       Analysis

Tim commenced work as a valuer upon graduating in 1983. He worked in a range of management roles with Prudential from 1986 finishing as Associate Director-Property in 1995. Development and Consultancy 1995/1996 and Agency from 1996.

 

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Kieran Lennon

Sales & Leasing Broker

Wellington (Agency)

Kieran joined Colliers International in 2014. He specialises in the sales and leasing of industrial properties Wellington wide, becoming one of the senior brokers with Colliers and established in his market.

Kieran concludes a high number of transactions ranging from leasing both small or large industrial properties to selling high value warehouses and development sites.

By specialising in Industrial Kieran has a depth of market knowledge and strong relationships with his clients and customers.

Prior to joining Colliers, Kieran had worked as a Business Analyst in Wellington and London and has played representative cricket for a number of years.

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