Warehouse space now in short supply
A country-wide lack of industrial property has left the booming warehousing sector with simply not enough space.
Strong economic growth and the high cost of building new warehouses have seen industrial vacancy rates plunge to record lows.
Aaron Young, managing director of Storepro, one of the country’s largest pallet racking suppliers, is very connected to the warehousing sector and says it is the tightest market he had seen in his 19 years in the industry.
‘‘Basically there’s nothing to buy, there’s very few to lease, the market’s very tight in terms of [being] owned by predominantly big landlords.’’
He estimated that in the last three years, Auckland warehouse land values had gone up by 30 per cent, with rent on its coat-tails. .
The high price of warehouse properties was being made worse by baby boomers looking for higher returns, who had turned to industrial property.
‘‘They’re pretty happy to accept a pretty lean yield in the 5 per cent range, which has now become the norm.’’
Building new was also prohibitive, with Goodman Trust’s chief executive John Dakin estimating recently that the average cost of building a warehouse in Auckland had risen about 50 per cent compared to five years ago.
The warehousing shortage is nation-wide but particularly acute in Auckland, boosted by the growth of large-scale logistics and freight forwarding businesses.
Colliers national research director Alan McMahon said demand had really ramped up over the last three or four years and even new speculative buildings were not keeping up with demand.
‘‘In Auckland there’s 12 million square metres of industrial property, and that’s warehousing and manufacturing basically, and at the moment the vacancy rate is 2.4 per cent, which is the lowest it’s ever been, since 1995 when we started measuring it.’’
Prime industrial space had slid to a historic low of 1.7 per cent, with secondary at 2.7 per cent. For warehouse owners, the shortage bodes well for rental income. McMahon said speculative builders was doing well out of the situation, but the lag in supply would inevitably push up rents.
-Catherine Harris