North Auckland industrial market snapshot Q3 2020
North Shore City industrial saw the largest increase in vacancy from 2.0% in 2H19 to 3.4% over 1H20. With that being said, it is still relatively low when compared to the overall 10-year average of 3.7%. The market has reached what appears to be a short-term equilibrium between supply and demand where a combination of low vacancy rates, acceptable levels of rental incentives and shorter lease terms is nicely balanced.
Zoning constraints and a lack of greenfield sites have continued to stifle industrial development in Auckland’s northern industrial precinct. Of the projects currently under construction, all significant contributions to supply will come from developments in Silverdale, including Stage 2 of the Foundry Road Development which will add 8,920 sqm of industrial stock. Other notable projects include the 13,557 sqm National Storage site and the 9,590 sqm Highgate Business Park addition, both due to commence construction in late 2020.
Industrial prime rents have remained stable across the board for the third consecutive quarter. North Shore City Industrial rents remained at averages of $164 psm and $138 psm for prime and secondary respectively over the quarter. Average prime and secondary yields remained similarly static over 3Q20 at 4.94% and 6.00% respectively. As with rents and incentives across Auckland’s industrial sectors, we forecast yields to remain stable for the rest of the year with ongoing investor interest in assets with a strong tenant covenant and longer-term lease profiles.