Micro-units big option for smaller investors
Smaller industrial units have become so popular that finding available stock is proving difficult.
The scarcity is underpinned by overall industrial vacancy rates of 1.34 per cent in Wellington and 1.6 per cent in Auckland, according to recent Bayleys research.
Bayleys Wellington director commercial Fraser Press says smaller industrial units in Wellington offer cheaper entry prices from the late-$300,000s to mid-$400,000s for units of about 50sq m.
The majority of small units are sold to owner-occupiers, while many “lock and leave” units are used as passive storage for household goods, cars, boats, or artworks.
As well as tradespeople, tenants include professionals such as accountants, small businesses and artists.
Press says most are used by purchasers, and a minority are leased out. “There have been relatively few investors in this market due to tighter funding requirements by bank lenders.”
Construction is now under way on three developments in Wellington following successful marketing by Bayleys.
They include 84 units beginning at
51sq m at Imperial Business Park in Petone where all but a handful have been sold between the late-$300,000s to mid-$500,000s.
Some of the architecturally designed units have frontages, allowing for showroom, retail, office and industrial uses.
The landscaped grounds offer easy access on to SH2, close to the Jackson St cafes and restaurants.
The development on the former Imperial Tobacco site sits next to Mitre
10 Mega, Plumbing World and Gilmours, and near bulk retailers Kathmandu, Briscoes, Rebel Sports, Bunnings and Smiths City.
Bayleys has also been marketing 59 units at Takapu Rise at the northern edge of Wellington approaching Tawa and adjoining the northern motorway network.
They have been built by Rosco Industrial, the developer which constructed Imperial Business Park.
The units are between 85-91sq m with prices ranging from the late$600,000s to $700,000. The stud height means owners can add a mezzanine floor.
Construction is under way and the development is due for completion in mid-2023.
At Porirua, a similar development of 80 units called The Works Elsdon is under way.
Bayleys North Shore commercial broker Richard Moors agrees the industrial market generally is “extremely tight”.
Silverdale, about 30km north of central Auckland, has seen much of the micro-unit action over the past 18 months.
A significant number of the 74 strata freehold units in Peters Way were sold off the plans. They were priced from $269,000 plus GST and range in size from 40-124sq m, with mezzanines optional. Several have been on-sold.
About 60 per cent were sold to owner-occupiers and the balance to investors, with “good leasing”.
Moors says the entry-level pricing means smaller industrial businesses can participate when they might have been priced out of the wider industrial sector.
The zoning allows for workshops, warehouses, distribution, storage, light manufacturing and fitness facilities.
With recent supply chain issues, it has also become more imperative for e-commerce businesses to have space to store.
The financial landscape is another driver of development and sales because banks look favourably on owner-occupiers, in some cases lending up to 100 per cent of value.
By contrast, investors have struggled to obtain finance from banks, Moors says.
Another attraction is the more modest average lease terms for microunits, commonly about three to four years with rights of renewal.
“Lease rentals tend to be less based on a per square metre formula than pricing on a per-week basis.”
Wairau and Albany remain the preeminent industrial location in Auckland with a number of smaller units turning over.
Bayleys general manager commercial and industrial South Island, William Wallace, says limited stock means that smaller units in places like Sydenham near the Christchurch central city have moved quickly and have proved popular with tradespeople.
“It’s because of the price bracket. You’re not spending millions. It’s a great little investment, especially for owneroccupiers,” Wallace says.
“When we get one in Sydenham we usually get eight to 10 inquiries. Port Hills is popular and further afield there are opportunities at Wigram and Rolleston, which is becoming a mini-city.
Bayleys Canterbury commercial and industrial broker Nick O’Styke says that over the past five years most micro-unit developments have been within major business parks at Rolleston, Belfast, Wigram and Hornby.
“We’ve seen big growth at Rolleston mainly at Izone Park and more recently at Iport Business Park.
“From a construction point of view they’re simpler too. They’re tilt slab with toilet facilities and a small office. Within a week or two of coming to the market they get snapped up,” O’Styke says.