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Auckland Industrial Report | First Half 2020

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An easing in strong market conditions following COVID-19 impacts could result in a lift in vacancy rates. The increase in vacancy however will be from extremely low levels, measured at just 1.4% as at February 2020. Mitigating factors will be the bolstering of demand through a massive expansion in infrastructure spending and growth within sectors such as transport, warehousing and postal services, which is likely to accelerate given rapid familiarisation with online and ‘click and collect’ services.

 

Development has remained limited. While the construction sector has responded to the high levels of demand there is only around 200,000 sqm of industrial space under construction, representing around 1.6% of total supply. Vacant land supply is one of the major constraints due to most significant vacant industrial land parcels being held by a small number of key stakeholders.

 

Rental levels have experienced a decade of growth in Auckland’s industrial sector. Prime warehouse rents now regularly push above $134 per sqm, while average secondary warehouse rents are at approximately $114 per sqm. Over the short-term, rents will ease, driven predominantly by an increase in incentives, albeit from a very low base.

 

Greater caution from investors will see increased levels of due diligence being conducted prior to purchase and a softening of yields, albeit from the current historic lows. Softer yields are most likely to eventuate for properties located within secondary locations that offer weak tenancy fundamentals. Prime assets will retain high levels of investor appeal.


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Auckland Industrial Report | First Half 2020

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