Snapshot Q4 2019
The Auckland City industrial vacancy rate remains low with little space under construction in the development pipeline while rents have continued their upward trajectory.
Demand for modern, well-located and practical industrial properties continues, and we expect little let up in this trend during 2020. Overall vacancy in the Auckland City industrial areas fell slightly to 2.1% in 2H19 from 2.2% in 1H19, continuing a trend of relatively stable yet structurally low vacancy. With such a low level of vacancy and little space under construction in the development pipeline, swift backfill of secondary properties is keeping vacancy low as the flight to quality observed across the Auckland region continues. We do however expect vacancy, particularly in secondary markets, to begin to rise again over the next few years in response to changing industrial market conditions.
Supply across the Auckland City industrial markets continues to slowly increase, with just under 40,000 sqm of space currently under construction. However, a number of projects currently in planning are set to enter the construction pipeline over 2020. This should result in an increasing number of completions, providing vacancy rates with some much needed breathing room in the longer term.
Rents have continued their upward trajectory this quarter. Prime rents for the Auckland City industrial areas overall rose to $167 psm, and secondary rents now sit at $136 psm, up from an average of $166 psm and $134 psm respectively in 3Q19.
Though the average prime yield remained stable this quarter at 5.13%, secondary yields have continued to fall, and now sit at 5.88%, down 0.25% from 6.13% in 3Q19.