Christchurch industrial market snapshot Q1 2021
Even with positive net absorption in 2H20, prime industrial vacancy in Christchurch increased by 220 bps.
Despite seeing positive net absorption in 2H20, we recorded an increase in vacancy across the board with prime vacancy rising 220 bps to 5.3% and secondary vacancy up 83 bps to 5.2%. Increasing by 183 bps, the Hornby/Islington precinct saw the greatest increase in the last six months. As in Auckland and Wellington, demand for Christchurch industrial space still lies predominantly with prime stock. We forecast this trend to continue, particularly as new supply injections return to lower levels in 2021 with reduced post-earthquake rebuilding and strengthening activity.
Our 2H20 survey observed the greatest net completion observed in Christchurch industrial precincts since 1H18: 59,174 sqm. The magnitude of completed stock is likely the result of a pushback on completion dates due to COVID-19 of which most additions came from the Western precincts. We are currently aware of 28 projects in the pipeline, all expected to complete between 2021 and 2023. Many of these projects are purpose-built projects for specific tenants although developers are being more selective when considering which tenants they are willing to accept pre-commitments from.
We observed an uptick in industrial rents in 4Q20 given the high proportion of quality stock, a substantial reduction in the pipeline and comparatively low base rents to pricing than in other markets. Average prime net face rents rose 5.13% to $123 psm over the quarter, while average secondary net face rents rose 6.98% to $92 psm. We have also seen a substantial yield compression for welllet industrial assets in Christchurch in recent months. In Q4, Average prime industrial yields firmed 45 bps to 5.50% while secondary yields firmed 50 bps to 6.50%.