Christchurch industrial market snapshot Q3 2020
Demand for industrial space in Christchurch remained strong over 1H20. Supported by positive net absorption, prime vacancy fell 80 bps to 3.1%, while secondary vacancy fell 240 bps to 4.3%. Although secondary stock observed a greater decrease in vacancy, demand for industrial space remains higher for prime stock. We expect this trend to continue given new supply injections have slowed as Christchurch's industrial market has stabilised. Here, the proportion of higher quality stock now available is further reducing secondary demand.
While 1H20 only saw 430 sqm of net completions, we are currently aware of around 35 pipeline projects within our survey boundaries, with most expected to complete in the next two years. Like Christchurch's office sector, the supply pipeline for industrial space has begun to normalise in recent quarters as post-earthquake rebuilds are completed. As such, we have observed significantly fewer net completions since 1H18. The effects of COVID-19 have only exacerbated the slowdown and various developments have experienced a push-back in completion date.
Prime and secondary rents have remained practically unchanged in the last year, averaging $117 psm and $86 psm respectively. Meanwhile, average prime yields remain at 5.95%, while secondary yields firmed 13bps to 7.00%. Industrial has proven itself to be the most resilient asset class across New Zealand over recent quarters, and with market fundamentals well-supported by interest in the industrial asset class, yields are anticipated to remain relatively low going forward.