Lack of space forces development
Demand for industrial properties in Wellington driven by a strong economy, infrastructure projects and the ICT and film sectors, is pushing rental prices up and vacancy rates down, new research shows.
The latest industrial report by international real estate firm JLL shows vacancy rates in the capital now sit at 3.4 per cent, as last year’s 7.8 magnitude earthquake heightened leasing demand in all sectors.
Some tenants from central Wellington were forced to seek space in the suburbs, including storage space. As a result, 12,000 square metres of industrial space was snapped up during the first half of the year.
JLL research consultant Chris McCashin said more properties would come onto the market as pressure continued to grow.
The conversion of Petone industrial properties to retail stores, such as the new K Mart, would also put pressure on available space, he said.
‘‘This trend will continue going forward as higher and better uses are sought by developers.’’
A lack of available land in and around Wellington, meant largescale industrial development had been a difficult proposition as land prices had risen, McCashin said.
However, there had been a rise in development activity in decentralised areas, such as Upper Hutt and Porirua, he said. ‘‘We have seen limited new supply in the traditional industrial regions recently and more cases of industrial development in areas north of the city due to improved transport links.’’
Rental prices had risen in most industrial precincts due to demand, which had filtered through to secondary properties, he said. Average prime rents now sit at $119 per square metre, while secondary rents are $75 per sqm.
The price rise was ‘‘directly attributable’’ to more secondary industrial leasing deals, as the availability of prime space was still at a premium, McCashin said.
‘‘The rise of new and existing tenants looking for space to expand is putting a strain on the limited number of of prime properties on the market.’’
McCashin predicted land values would continue to rise with lack of supply the key driver over the next year.
‘‘Conversionary pressure, particularly for bulk retail uses on the fringe of industrial precincts, will continues to underpin value levels going forward.’’
"The rise of new and existing tenants looking for space to expand is putting a strain on the limited number of of prime properties on the market."
JLL research consultant Chris McCashin