Industrial property attracting investors on hunt for yield
Industrial property continues to be the star performer in the Auckland real estate market, with strong demand evident among owneroccupiers and domestic and overseas investors, especially for higher value properties, according to the latest independent research commissioned by Barfoot and Thompson.
Launching the agency's latest Insite publication, Barfoot and Thompson commercial manager John Urlich said demand for commercial property had remained strong on the back of low vacancy rates and a relatively positive outlook for the economy.
However, increased development activity and further increases in rents in the industrial sector showed it was the one to watch. “There is strong demand for industrial real estate in Auckland,” he said.
“Land values in East Tamaki have exceeded $750/sq m and fringe sites are selling for up to $400/sq m. In addition, the number of industrial building consents is up 89 per cent on five years ago. However, demand is putting downward pressure on yields.”
Urlich said there was positive movement in the office and retail property sectors in Auckland. “New office space due to come online in the central city will alleviate pressures in the market, but tenants will seek to take advantage of back-fill opportunities.
“And despite challenges within the retail sector itself, demand for welllocated retail property remained strong.” However, he noted that rental growth for the sector was low, despite low vacancy rates.
Overall, Urlich argued that the global strategy that has seen central banks undertaking further interest rate cuts had done little to reduce the appetite for commercial property over the last two months.
“The never ending search for yield coupled with the proven performance of the asset class sees demand remain at historic highs,” he said. “The desirability of the New Zealand market is understandable. We remain stable with good prospects going forward.
“Our economy continues to expand, albeit at comparatively lesser levels than the recent past, but the recent news of the Government surplus does much to usher in the promise of new growth on the back of increased infrastructure investment. There is little to suggest that tenant demand will outstrip the supply of land and buildings.”
The Insite portfolio contains 30 properties from around the country, with industrial warehousing and units figuring strongly. Seventeen of the properties are for sale by negotiation, seven by tenders, four by deadline private treaty, and two by auction.
A highlight in the portfolio is an industrial warehouse in the Auckland suburb of Mt Wellington. Agent Duncan Bell, who is marketing the property for sale by deadline private treaty closing 4pm, November 14, says it is compelling industrial investment opportunity.
“34A Leonard Rd is held under a crosslease title, and comprises 19/100 share of 2.64ha of land that houses a
“There is little to suggest that tenant demand will outstrip the supply of land and buildings.” Barfoot and Thompson commercial manager John Urlich
1390sq m warehouse and 344sq m of office accommodation and other ancillary structures,” he said.
“Zoned Light Industry, the property is well-located in one of New Zealand's most in-demand industrial precincts. It is only minutes from the Southern Motorway, Great South Rd and Sylvia Park retail park. Rarely do opportunities of this nature present themselves.”
The tenant’s lease expires this month so the property can be sold with vacant possession, or a new lease deal can be negotiated with the tenant.
The industrial workshop and storage building was built in the 1980s to suit the needs of N Cole Ltd and incorporates quality office space to the front of the building with medium stud warehousing to the rear. An additional workshop comprising 264sq m with 226sq m of mezzanine flooring provides potential for high stud warehousing. The outdoor area features a secure asphalt yard with 37 car parks.
Bell says: “The recent large-scale development activity at Sylvia Park and the acquisition of Turners and Growers by Goodman property have made this area desirable for occupiers and investors.”
On the other side of Auckland, in New Lynn, Barfoot and Thompson is selling two neighbouring industrial units from a deceased estate. 2D and 4D McWhirter Pl are to be auctioned separately on November 13.
Selling agents Colin Stewart and Paul Donovan say both properties are being sold with vacant possession and as such would be of equal interest to owner-occupiers and investors.
The property at 2D McWhirter Pl comprises 175.5sq m of office/warehouse space on a 197sq m freehold site, while the property at 4D McWhirter Pl comprises 210sq m of office/warehouse space on a 267sq m freehold site.
Donovan and Stewart say: “Both were built in the early 2000s, are zoned Business-Light Industry, allowing for a multitude of uses, and are located in a vibrant commercial area.”
Both units offer buyers a 6.5m stud warehouse space with a mezzanine office floor. Unit 2D comes with three car parks while 4D comes with six car parks.