Wellington vacancy dips to 2.1 per cent, Auckland up to 2.2 per cent
Wellington’s industrial property vacancy rate has dropped to a record low while supply in the Auckland market continues to play catch-up with demand, Colliers International research shows.
The latest Colliers Essentials industrial market snapshots, released today, found rents are tracking upwards in both markets while yields continue to firm.
In Wellington, the overall industrial vacancy rate dropped to 2.1 per cent as of November 2017, down from 2.9 per cent a year earlier.
In Auckland, the vacancy rate inched up to 2.2 per cent as of February 2018, up from 1.9 per cent a year ago.
Colliers International Research Manager Leo Lee says Wellington’s industrial property supply has been constrained by a shortage of available land in the region.
“There have been several small new builds around Wellington recently, but these have primarily been undertaken by owner-occupiers, providing little relief for the industrial rental market,” he says.
“With little new stock entering the market and strong tenant demand, we’re continuing to see rental growth and further yield compression.”
Lee says prime industrial warehouse rents in Wellington now average $127/sq m gross, while secondary rents average $98/sq m gross. Prime yields have firmed to 7.5 per cent, while secondary yields are at 8.7 per cent.
“Low vacancy rates and ongoing demand pressures will continue to put upward pressure on rents over the next year,” Lee says.
“Yields will also continue to firm through 2018 due to the lack of available stock for sale.”
In Auckland, about 250,600sq m of vacant industrial space is available.
“Prime vacancy rate remains tight at 1.5 per cent, while the secondary vacancy rate has nudged up to 2.5 per cent,” Lee says.
Lee says the shortage of industrial space has accelerated the development of speculative new builds, such as Goodman Property’s expansion of Highbrook Business Park.
The scarcity of available stock has also led to a 35.5 per cent decline in industrial property sales.
Provisional figures for 2017 show $1.07 billion of industrial property was sold in Auckland last year, compared with $1.66 billion in 2016.
Lee says strong investor demand has pushed industrial yields to record low levels, with prime yields now at an average of 5.8 per cent.
“Near-term capital growth is anticipated, principally from rental growth. Prime net warehouse rents are up, at an average of $121/sq m, while secondary rents average a net $101/sq m.”