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News Release


Auckland industrial market competitive despite hefty development pipeline

JLL Research release Q1 2018 Pulse Reports



Long term investment with development potential/new-zealand/en-gb/news/916/long-term-investment-with-development-potentialAUCKLANDLong term investment with development potential
Former Fire Station on high profile corner site/new-zealand/en-gb/news/915/former-fire-station-on-high-profile-corner-siteCHRISTCHURCHFormer Fire Station on high profile corner site

Industrial is the strongest performing sector in Auckland with vacancy sitting at 2.1%, the lowest level observed since JLL records began in 1993.

The industrial market is experiencing a prolonged bull-run, with a number of new areas increasing their industrial capacity in an effort to satisfy pent-up demand. One such area is North West Auckland which includes Hobsonville, Westgate and Kumeu. JLL recently released their first research report on the industrial market in North West Auckland.

JLL Associate Director of Research, Tom Barclay says, "This is the first time we have tracked the North West area of Auckland, a decision we made following the area's rapid growth and attractive future prospects for the industrial sector as an alternative to the traditional precincts.

"The traditional industrial hubs like Mt Wellington, Penrose, East Tamaki, Wiri, Wairau and Rosedale are all experiencing record low levels of vacancy. With limited greenfield development land and low vacancy rates, new industrial development is being driven further South of Auckland but also to the North West, which is proving a viable alternative for some North Shore businesses."

The North West has access to greenfield land ripe for development and following the completion of the Waterview Connection and the Western Ring Route, the transportation links are all in place drawing industrial businesses to the area.

"Now is an opportune time for businesses or owner occupiers to consider their options to design/build a premise in the North West. With the government committed to supporting infrastructure in the area, securing a position should see benefits in the future from the increased workforce and connectivity provided," says Barclay.

In contrast to the North West, South Auckland is a well-established industrial area and has been experiencing high levels of demand over the past five years.

"We expect South Auckland to be the main contributor to industrial development for Auckland through to the end of 2020. We are tracking approximately 419,000 sqm of new supply in the Auckland development pipeline. Of this total, approximately 273,000 is under construction while the balance either consented or in planning," explains Barclay.

"While there is a significant portion of the development pipeline attributed to speculatively built stock, the majority of properties are being leased up prior to completion. Businesses looking to relocate to new premises need to be thinking ahead of the game to secure a suitable property.

"Beyond 2020 we expect to see development move further south as land is chewed up in East Tamaki and the Airport Corridor.

"Landlords are in a favourable position across the wider Auckland market. The average combined rate for prime stock currently sits at $144 psm. We expect this to increase to $149 psm by the end of 2018 and to $154 psm by the end of 2019," says Barclay.

The industrial sector has seen record levels of transaction volumes, with over $900 million of transactions in 2017. Major transactions include the likes of the TIL Properties Portfolio which PFI purchased for $69.5 million, Augusta's divestment of 100 Carbine Road for $36.8 million and Toll's purchase of the Fletchers site in Otahuhu for $59.5 million.

• Industrial is the strongest performing sector in Auckland. Auckland industrial vacancy sits at
2.1%, the lowest level observed since JLL records began in 1993.

• Rising land values and construction costs are forcing up rental rates, which has meant that for some business owners the idea of purchasing an industrial property has become more attractive, particularly while interest rates remain low.

• JLL expects the industrial sector to experience strong rental growth as a result of persistently low vacancy levels. The average combined industrial rental currently sits at $144 psm, we expect this to reach $149 psm by the end of 2018 and $154 psm by the end of 2019.

• 2017 saw a record level of industrial transactions in New Zealand. JLL track all sales over $5 million. Industrial property across New Zealand totaled over $900 million in 2017.

• JLL currently tracks approximately 419,000 sqm of new industrial development across the Auckland region.

To read the full report CLICK HERE.