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The North Shore comes of age

The commercial property market on Auckland’s North Shore has matured, as the lack of greenfield space in key areas forces land values ever higher, commercial property company JLL says.



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​​North shore-min.jpgOver the last two years, total returns on industrial property in the Auckland region have increased. For prime buildings, total returns have increased from 12.1% in December 2013 to 20.9% in December 2015. 

The trend continues in secondary stock, with total returns increasing from 19.2% in December 2013 to 28.6% in December 2015.

One of JLL’s North Shore specialists, David Mayhew, says the tight market is good news for property owners. 

“Limited land availability has severely hampered the development of new supply. Strong leasing activity and competitive tenants have applied upward pressure on rents, allowing landlords to take full advantage of current market conditions.”

Property owners in core areas such as Albany and Rosedale should reconsider the value of their assets, Mayhew says. Vacancy rates are low and demand is such that the value of semi-industrial property is rising. 

“People may be sitting on a property that’s worth more than they realise. In many cases, they can get more for it than they think they can. In a lot of cases it is clear that landlords who have owned property for some time have also not maximised rent through negotiating at renewals meaning they are missing out on considerable upside,” Mayhew says. 

“Yields have firmed considerably since the market began to recover in 2013 and are now at record low levels. Accordingly the historic values which many property owners have in their minds are likely to be considerably lower than the values which could be achieved in the open market.” 

In response to this vigorous market, JLL Auckland has doubled the size of its North Shore team, welcoming four new agents this year. 

“Rental growth has principally occurred within prime North Shore, as tenants are increasingly seeking a higher quality space. Prime industrial rents grew to $142psm in the second half of 2015, an increase of 5.2%.”

JLL forecasts demand to remain robust in the first half of 2016, despite limited available options. The popularity of the North Shore as a well-connected industrial hub is driving tenant competition and will allow landlords to keep the upper hand this year.

The population of the Upper Harbour Local Board area (which includes Albany and Rosedale) was 56,800 in 2013 and is projected to grow to 109,600 by 2043. There are 33,881 people living within a 3km radius of Albany town centre*. 

JLL is also aware that, due to infrastructure improvements at Waterview and along the Northwestern Motorway, we are likely to see demand for stock shift both west and northwards as connectivity to south Auckland and the airport improves. 

Tenants that can’t afford to remain in the key North Shore areas are looking further afield, prompting more activity in the growth corridors of Silverdale and Hobsonville.  

Auckland Council’s Silverdale Centre Plan has been created to plan for expected growth in the area over the next 30 years. Council is also in the first stage of a $1billion transformation of Northwest Auckland, which includes a new village centre and employment park at Hobsonville. 

“Our advice is for those in the property market to consider their next move carefully,” Mayhew says. “Whether you’re a tenant or a landlord on the North Shore, you should find out what your options are now, to manoeuvre into a better property position.”

​*Source: JLL Research and Consulting; Statistics NZ​