2019 Commercial Property Review - New Zealand industrial market

Industrial remains the commercial property sector's standout star

Last year's sale of the Foodstuffs Auckland distribution centre at 60 Roma Road, Mt Roskill, was the largest single industrial property transaction in New Zealand on record

This week, Colliers International's Research team is reviewing New Zealand's commercial property market across the key sectors. In this instalment, Research and Communications Director Chris Dibble looks at the industrial market.

Auckland

Overview: Our latest August 2018 industrial survey findings indicate a record low vacancy rate of 1.7 per cent overall. This is the lowest vacancy rate recorded since our surveys began in August 1995. Warehouse rental growth shows no sign of slowing down at least in the short-term, primarily due to the lack of supply and the sharp reduction in secondary vacancy, limiting tenant options. Prime average net warehouse rents continue to track upwards, reaching $124 per square metre in June 2018, a 4.4 per cent increase from a year ago. In September, Foodstuffs’ 13.12ha distribution centre in Mt Roskill, Auckland (pictured above) sold for $93 million. This represents the largest singular asset industrial transaction on record in New Zealand. The previous record-holder was the $90 million sale of The Warehouse distribution centre in 2012. Both properties were sold by Colliers International.

Forecast: The persistence in occupier demand which has kept vacancy rates at record lows is unlikely to be met by a sufficient supply response. Land availability and pricing remains the key market mechanism that will result in demand outweighing supply. This will result in the market remaining in favour of landlords. Greater levels of cashflow will likely be sought with yields at record lows. 

Wellington

Overview: The Wellington industrial market continues to perform strongly, driven by strong tenant demand, a lack of available industrial supply, and growth from local industries. Vacancy has dropped to 2.1 per cent in November 2017, down from 2.9 per cent a year ago. Prime average warehouse rents climbed to $108 per square metre in June 2018 from $100/sq m a year ago. Average prime yields have firmed 17 basis points relative to a year ago, reaching an average 7.52 per cent. Average secondary yields have reacted in a similar fashion, tightening 19 basis points to an average 8.71 per cent in June 2018. Transmission Gully, along with other infrastructure projects like the Whitby and Waitangirua link roads by Porirua City Council, will create better and more efficient transport options for new areas of development. Timeframes for the Petone to Grenada link road have been extended due to the Government Policy Statement 2018 review.

Forecast: Wellington’s buoyant industrial market continues to gather pace with a construction pipeline that hasn’t matched occupier demand. Industrial supply is constrained by a shortage of available land, but new transport links will bring new opportunities. We forecast slow but steady rental growth across the regions with a slight firming in yields over the next 12-24 months due to positive sector fundamentals along with an accommodative investment environment.

Christchurch

Overview: Average prime and secondary warehouse rents have remained steady over the last year at $103/sq m and $77/sq m respectively. Annual building consent numbers have declined ever so slightly from 179 in 2017 to 161 in 2018. Prime average yields have firmed for the first time since December 2016, tightening to 6.55 per cent in June 2018, a drop of 28 basis points for the same time last year. Notably, in June, Steel & Tube sold their property on Blenheim road for $21.1 million on a sale and leaseback basis.

Forecast: The release of significant industrial land across Christchurch post the earthquakes has seen occupiers with a significant number of options to pursue. While supply and construction activity has been strong, the market is now reaching a period of stability. This should assist with cashflow and investment returns over the medium term which have remained broadly stable in recent years.

Read more from the series:

Get the latest commercial real estate insights and property news.

Looking for commercial real estate? Try our property search or connect with expert commercial real estate agents today.

Need your real estate assessed? Work with our expert property valuation services team.

Looking to develop your career in property? Learn about careers at Colliers.

Subscribe to News
Share this Page
People
Featured News
Close

Saved Properties

Remove All
You have no saved properties. Click the 'save' button associated with a property listing to see it displayed here.
Close