Snapshots

Auckland City Industrial Market Snapshot Q1 2019

Demand continues to outstrip supply, keeping vacancies in the Auckland Industrial sector to a minimum.

August 08, 2019

Demand

Demand continues to outstrip supply, keeping vacancies in the Auckland Industrial sector to a minimum.  Available space remains highly sought after by occupiers, resulting in a continued downward pressure on vacancy rates. After reaching 1.7% in 2H18, it was evident that tenants were struggling to enter into leases for premium or larger properties. This is forecast to persist through 2019, with a slowdown in development activity.

Supply

Although the number of new projects entering the pipeline has declined, there remains a significant amount of development currently underway. Within the Auckland City Precinct this includes the construction of five warehouse units at 32-38 Patiki Road and is forecast to deliver some much needed ~10,400 sqm of industrial space by 2H19.

Key reasons behind the dampened supply response include inflated land values and rising construction costs. While demand for new stock remains consistently strong, we believe these restrictions will continue to cap new supply going forward, resulting in stable vacancy levels.

Asset Performance

Rents continued to rise in 1Q19, following low vacancy levels and ongoing occupier demand. Last quarter we saw prime industrial rents rise by 2.53% to $162 psm (blended rate), with secondary rentals remaining static at $132 psm (blended rate) over the same period. Incentive levels remained minimal.

Auckland Industrial yields in 1Q19 were unchanged from 4Q18 at 5.38% for prime investments and 6.50% for secondary properties. Expectations are that they will remain at the same levels throughout 2019. Investor interest remains focused on quality and tenanted stock.

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