- Overall vacancy declined to 1.9% in February 2022 from 2.2% a year earlier with both prime and secondary rates falling to 0.8% and 2.1% respectively. Vacancy rates declined due to ongoing strengthening in demand factors. Online retailing’s continued expansion fuelled the requirement for additional storage, distribution and last mile delivery facilities. Both residential and commercial development pipelines are increasing and major infrastructure projects are being progressively rolled out which are also adding to demand.
- Building consent issuance for 323,393 sqm of new industrial floorspace was approved in the 12 months to January 2022. While approximately 9% ahead of the 10 year average, the latest figure lags the 471,100 sqm consented over the year to January 2021 reflecting both the impact of COVID-19 and an increasing number of industry constraints. Construction businesses are facing significant skills and materials shortages while the value of a limited amount of suitably zoned land has continued to escalate industry challenges.
- Rental growth was flat in 2020, but resumed in 2021 as market conditions continued to tighten and inflationary pressures began to build. Landlords are increasingly looking to link rent reviews to CPI as opposed to fixed increases. These factors will likely lead to further rental growth over 2022. Prime average warehouse rents currently stand at $144 per sqm while average secondary grade warehouse rent is at $125 per sqm.
- Industrial property continued to attract high levels of investor interest throughout 2021 leading to further yield compression. Average prime yields stand at 3.8%. Further tightening is increasingly unlikely given interest rates rises, however so too is a significant correction given elevated levels of demand for limited supply.
