Christchurch Industrial Market Snapshot Q1 2019
With a decrease in space under construction, demand has been able to catch up with the significant increase in new stock built post-quake.
Demand for industrial stock of a high quality, modern and well connected nature remains robust, as vacancy rates dropped from 7.5% to 4.8% in 2H18. With a decrease in space under construction, demand was able to catch up with the significant increase in new stock built post-quake. On the other hand, demand remains subdued for secondary stock.
Although a supply response has begun to slow significantly, stock continues to trickle into the market with a number of projects progressing through the development pipeline. However, we have seen a significant decline in new projects being added as demand is now largely satisfied and development is largely conducted on a basis of being built for specific tenants, rather than spec built.
Looking forward, the bulk of supply will be built for specific tenants, with developers typically putting new projects on hold until they can confirm the space will be occupied upon completion.
With vacancy rates hovering at consistently low levels, the market has adjusted and we have observed an upwards trend in rental rates. Prime industrial space saw an increase of 2.7% from $111 psm to $114 psm from 4Q18 to the current period. Following the move in prime rents, secondary industrial space was up 2.3% from $86 psm to $88 psm, both given as blended rates.
We are expecting further rental growth with new supply slowing down notably and stable occupier demand shifting the market back to equilibrium. Rental growth for secondary assets is forecast to be far less pronounced as occupiers continue to favour high NBS rated and well connected stock.