Auckland City industrial property market snapshot Q3 2020
Overall vacancy for the Auckland City industrial property market increased 10bps to 2.2% during 1H20. Vacancy within the Auckland industrial precincts continues to remain low overall when compared to the 10-year average of 3.7%. Given continued robust demand for high quality space, prime stock vacancy in particular is expected to remain low for the foreseeable future. Any weakness in demand is expected to primarily impact secondary stock as occupiers look to move into new or better stock, continuing trends of a flight to quality.
We have continued to observe a modest number of developments under construction in our Auckland City industrial pipeline and expect this to provide a stable supply of stock for the market over the next two years. In addition, despite COVID-19 disruptions, most developments have experienced little to no delay in completion timing. There are approximately 10 projects currently under construction in the Auckland City industrial precinct, including the Woolen Mills redevelopment in Onehunga, which will add 17,039 sqm of stock, and the Douglas Pharmaceuticals expansion, due to add 4,500 sqm.
Prime Auckland City industrial rents currently sit at an average of $168 psm, with secondary Auckland City industrial rents stable at $136 psm. Given such low vacancy across Auckland’s industrial sectors, we do expect rents to resume rising, albeit slowly, over the foreseeable future given the availability of new and second-hand accommodation remains tight, particularly for prime assets. With relatively limited transactional evidence over 3Q20, prime and secondary yields also remained at 2Q20 levels of 4.94% and 6.00% respectively.