Industrial rents under pressure
Rents are rising in Wellington’s industrial market as vacant space becomes scarce, a new report says.
The annual Colliers International Industrial Market Indicators report shows New Zealand’s industrial property market is ‘‘incredibly buoyant’’, with investor confidence strong across the country.
In the capital, demand from both tenants and owner-occupiers has grown even stronger during the past year.
Colliers research national director Alan McMahon said Wellington had a record low vacancy rate of 2.9 per cent.
‘‘This is a further reduction from 3.6 per cent a year earlier, showing that pressure is building for development.’’
As a result, rents were increasing across the board, he said.
Meanwhile, nationally, robust occupier and buyer demand was a key driver of investment activity, McMahon said.
Increasing land values and construction costs would reduce the amount of new industrial development in some centres in the next few years, keeping vacancy rates low, he said.
‘‘The lack of stock means sales levels have eased since last year, but yields are not expected to go too much further south over the next 12 months.’’
In Auckland, the industrial market had ‘‘gone from strength to strength’’, with a vacancy rate of just 2.1 per cent, McMahon said.
‘‘Demand from both tenants and owner-occupiers has been consistently strong over the past year as businesses continue to expand off the back of a strong economy.’’
Colliers industrial national director Greg Goldfinch said there was increasing demand for higherquality, larger-footprint buildings.
‘‘We recently brokered the largest design build deal the market has seen in recent years, with Bunnings Warehouse commissioning a new 20,500-square-metre distribution centre at Auckland Airport,’’ Goldfinch said.
‘‘Smaller industrial premises also remain sought after, with continuous demand over the last 12 months.’’
About 185,000sqm of new industrial development had been completed in Auckland over the past year, while 120,00sqm was still under construction, he said.
‘‘New supply is basically playing catch-up with excess demand, rather than tipping the scales towards oversupply. In fact, favourable conditions are fuelling speculative development, so we’re expecting further prime stock to be built in the coming year.’’
However, developable industrial land around Auckland was hard to find. In the year to November last year, 82 hectares were absorbed, which was one of the fastest rates of land take-up since the global financial crisis, he said.
Meanwhile, the survey also found there was strong performance in smaller centres.
‘‘In Tauranga, the industrial market is experiencing record low vacancy, while in Hamilton, prime vacant space is being absorbed almost as soon as it becomes available,’’ McMahon said.
In Christchurch, prime industrial supply was tight, while demand continued to outweigh supply in Dunedin.