Demand for property ‘insatiable’
Close to a billion dollars worth ofnewindustrial buildings have been approved in Canterbury since the earthquakes, LIZMCDONALDreports.
Demand for new industrial property triggered by the earthquakes is showing little sign of abating in greater Christchurch. Despite high levels of construction, investor demand for industrial property is being described as ‘‘insatiable’’.
Councils have granted consents for $275 million worth of new Canterbury industrial buildings in the past year, the highest annual figure since the quakes, according to Statistics New Zealand.
The bulk have been in Christchurch, Selwyn and Waimakariri, where 20 hectares worth of new industrial buildings, such as factories and warehouses, were approved over 12 months.
Demand has shifted from replacing quakehit premises to catering for rebuild business and those supporting and supplying them.
Ian Little, head researcher for real estate group Bayleys, says Christchurch and Canterbury has ‘‘cemented its position as the industrial and distribution hub for the South Island’’.
In his latest property report, Little said industrial property development in greater Christchurch had picked up again after showing signs of slowing late last year.
Recently consented construction has been evenly split between storage facilities and factory units, with about 100,000 square metres of each getting approval in the past year in Christchurch city and Selwyn and Waimakariri districts.
For investors, property is in strong demand but scarce supply in the city’s main industrial areas of Hornby, Sockburn, Rolleston, Sydenham and Woolston. The same areas have sufficient space to lease, and sufficient demand from tenants.
This has pushed prices up, Little says, and properties in the $1m to $5m range are in particular demand from buyers.
Bigger properties are also selling. Recent major sales include Goodman Property Group’s disposal of two of their Glassworks Industry Park sites in Hornby: the 9100sqm site occupied by Placemakers sold for $7.2m, while its neighbour leased to Big Chill sold for $7.1m.
Commercial property valuer Gary Sellars, director of Colliers Valuation, said in a market report last week that industrial property yields (returns as a percentage of prices) were at record lows.
This had been caused by a combination of limited supply, ‘‘an insatiable demand in terms of investors’’, and low interest rates leading to cheaper loans and poor returns on cash investments, Sellars said.
‘‘While some of the large corporate real estate owners have opted to sell Christchurch investment property, there is no shortage of buyers evident in this strong market.’’
The Colliers report also noted the high levels of vacant industrial land sales in the past few years. About 200 sites have changed hands since the earthquakes, with 2013 recording the most sales since the 1990s. The average price of industrial blocks sold in Christchurch was about $900,000 last year, and $1.3m in 2013.
The report described the supply of industrial property in Christchurch as having been ‘‘severely depleted’’ by the quakes, after which demand ‘‘exploded overnight’’.
Both the Colliers and Bayleys reports commented on the rise of industrial parks as a force in the property market.
Major industrial parks in greater Christchurch include Izone at Rolleston, Glassworks and Hornby Quadrant both in Hornby, Dakota and Mustang parks by the airport, Belfast on the old Belfast freezing works site, Portlink and Castlerock both at Hillsborough, and Waterloo at Islington.
Newly announced is Iport, to be built next to Izone.