A high point for industry
Developers are responding to Auckland’s shortage of industrial property, Catherine Harris reports.
Auckland’s supply of finished industrial property is set to reach its highest point in a decade this year, according to CBRE.
The consultancy’s latest Auckland industrial report said completed industrial space could exceed 250,000 square metres by the end of the year.
That was good news for spacehungry industrial occupiers, CBRE research manager Gergely Gaspardy said.
’’Prime quality vacancy was at just 0.6 per cent at the end of 2015, which represents a mere 25,000sqm of vacant and available space so the increased level of development underway now will create wider options for occupiers than in previous periods.’’
When the new space was added to buildings vacated due to businesses consolidating and relocating, occupiers would have a lot more property choices, he said.
CBRE believes industrial construction in Auckland is now at its highest level since 2007.
Three of the five largest design build developments are for manufacturers (Sistema, Fonterra and Prime Panels), accounting for around 30 per cent of the overall pipeline.
South Auckland is leading the way, with over two-thirds of the new developments rising up at the Airport, East Tamaki and Wiri. Auckland Airport in particular is now one of the city’s biggest property developers.
The majority of new supply is being purpose built for precommitted occupiers, and although all major developers are currently working on some sizeable speculative projects in those areas, they are often snapped up well before completion.
‘‘We know from our occupier survey in late 2015 that the most relevant factor for industrial businesses when it comes to their property decisions is expansion.
‘‘So it is not surprising that a large proportion of the new supply in the pipeline caters for the expanding business needs of occupiers,’’ Gaspardy said.
‘‘With Wiri, the Airport and East Tamaki experiencing increasing levels of construction activity and subsequent occupier demand, these areas are fast becoming the city’s core industrial heartland, rather than seen as locations further away from the city, and therefore being somewhat cheaper than more central areas.’’
Gaspardy said industrial occupiers looking to expand or relocate in the next 12 to18 months would have greater choice, but most of it was in the new areas where occupancy costs were fast approaching central Auckland’s.
The difference in prime quality net effective rents between the Airport and Penrose went from 17 per cent at the end of 2013 to 9 per cent in Q1 2016.
So cost-sensitive occupiers were looking even further south, to areas like Takanini, Papakura and even Drury.
‘‘However, if these more southern locations are being considered, occupiers do need to rethink their operational structure in order to mitigate the increased transportation and distribution costs,’’ Gaspardy said.