The Auckland region's industrial vacancy rate increased from 2.1% to 2.2% over the six-month period to February 2021. While up, the latest figures show a slowing in the rate of increase, reflecting the rapid rebound in tenant demand evident since the end of 2020’s national lockdown. Given the strength of the fundamentals supporting the industrial sector and the positive forecasts for the economy, it is increasingly likely that vacancy has now peaked.
The year to February 2021 saw approximately 240,000 sqm of new industrial floorspace added to the regional inventory. Building consent issuance slowed in 2020, with 363,690 sqm approved compared with approximately 488,500 sqm in 2019. Ongoing tight market conditions though will incentivise an uplift in development activity.
Land values have surged reflecting the shortage of industrially zoned greenfield sites across the region. Average land values across the region reached $910 per sqm in the opening quarter of 2021, an increase of approximately 22% over the last year. Additional impetus for land value rises has been provided by the emergence of demand from the datacentre sector.
Investor confidence in Auckland’s industrial sector has rebounded strongly over recent months. Results from the 1Q 2021 Colliers investor confidence survey showed the sector to have registered a net positive (optimists minus pessimists) score of 76%. This confidence has translated into heightened competition for assets driving yield compression with average prime yields tightening from 4.5% to 4.1% over the six months to March.
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