Auckland City Industrial Market Snapshot Q3 2019
With supply remaining out of kilter with demand, rental growth has recorded further upward pressure.
Demand
Low vacancy remains an issue for tenants seeking new or larger premises, with no structural changes to tight market conditions in 3Q19. Tenants with their eyes on prime new-build stock continue to absorb fresh supply. The gaps left behind are being swiftly filled in both prime and secondary markets. We expect this trend to prevail until supply catches up to demand, allowing for an increasing number of tenants to shift into higher quality space in both markets. Supply in the Auckland City market remains relatively minimal in comparison to the Southern and North-Western markets, where greenfield land is more readily available.
Supply
Across Auckland as a whole more supply has entered the pipeline than previously anticipated for the third quarter. However, the majority of this falls outside the Auckland City industrial patch (Penrose, Avondale, Mount Wellington and Henderson).
Despite this, projects underway within the survey boundaries falls makes up for just below 40,000 sqm, with further projects in various stages of planning or consenting. There has been a noticeable slowdown in new projects entering the pipeline, reflecting the increasingly challenging development conditions present in the market.
Asset Performance
With supply remaining out of kilter with demand, rental growth has recorded further upward pressure. The average prime and secondary rental rates are now recorded at $163 psm and $133 psm respectively.
The average prime yield shifted downward 25 bps to 5.13%, followed closely by secondary yields dropping 37 bps to 6.13%.
