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Scarce supply and low vacancy fuels industrial property demand in Christchurch

Scarce supply and low vacancy fuels industrial property demand in Christchurch

Christchurch is the stand-out performer in the industrial property market with fierce competition for quality properties and investors prepared to take on more risk.

Sam Staite, Director of Industrial at Colliers in Christchurch, says the city is now widely recognised nationally for its excellent investment fundamentals.

“The majority of interest in the higher-end of the market now comes from outside of Christchurch but not necessarily just from the syndicators who have been dominating this higher-value market for the past five plus years. Private investors are now also very much in the chase,” Staite says.

“Vacancy levels have plummeted during the past 12 months and those with a good understanding of industrial property see this market as severely under-valued with very strong rental growth prospects.

“Auckland industrial prime rental rates can be more than 50 per cent higher than those in Christchurch and occupiers with high freight volumes are reaping the benefits of affordable transport backfill rates when distributing product from Christchurch to the north. E-commerce is further driving the need for more space and in general our warehousing requirements are getting bigger.

“The demand for quality stock is insatiable.”

A year ago, investors were clamouring to secure industrial properties with decent lease terms but now they’ll consider significantly shorter terms and are happy to take a risk on vacancy if the property has the right investment fundamentals.

Staite says investors are “more than happy” to take the vacancy risk, highlighted by multiple investors bidding for a new vacant building in the Hornby Quadrant that sold at auction for $4.14 million recently.

“Rapidly declining industrial vacancy rates in Canterbury are giving investors the confidence to look at shorter term lease stock. We estimate vacancy rates in the sector have dropped by about 30 per cent in the past 12 months, driving demand for land and design builds.

“Investors are also hoping that there might be some rental growth after largely remaining static for the past decade. It is no secret that our low rental rates are now well out of whack with the rest of the country.”

Recent industrial sales negotiated by Colliers that highlight the strength of the sector include:

· The Opzeeland buildings and land holding in tightly held Hornby. Sold to a Queenstown syndicator. Seven-year lease in place.

· An industrial investment with scale in Rolleston. Leased to the well-known business Pegasus Engineering. Sold to an Auckland based syndicator for $11.5 million.

· A bottom drawer investment in Harewood with a 15-year lease in place. Sold to a Dunedin investor for $11.5 million.

· Two high-calibre industrial buildings in Wigram leased to highly respected United Industries on a shorter-term lease. Sold for $8.2 million to a private Southland based investor.

· A private Nelson investor bought a property in Carmen Rd, Hornby on a 2565sq m site, for $3.5 million representing a circa 4.5 per cent yield. Four-year lease in place.

· Five industrial properties, including one vacant new build. Sold under the hammer for more than $23 million to a mix of Auckland and Christchurch investors.

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Sam Staite

Director of Industrial

Christchurch (Agency)

Sam is one of New Zealand’s top performing brokers and has consistently been No. 1 in the South Island. Sam leads a team of eight successful and highly experienced agents who each have strong market share in their respective niche markets. He has negotiated the majority of the South Island’s largest industrial transactions during the past 13 years and in the past six years alone has delivered in excess of $830 million in sales.

Sam works closely with his colleagues across the AU/NZ Colliers network to ensure the Christchurch commercial market and his clients are widely connected. He works with corporate and private clients who benefit from his in-depth knowledge of the industrial sector, his proactive approach and strong business networks.

Recent highlights include the South Island’s largest industrial sale – the $53.75m transaction of 13 buildings known as Castle Rock Industrial Park, the $39m sale of Goodman’s Glassworks Industrial Park as well as countless sale and leasebacks for entities such as Turners and Growers, Online Distribution and BOC Gas.

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