Snapshot Q4 2019
The South Auckland Industrial Precinct' vacancy rate slightly dropped to 1.5% and now it is reported to be the lowest among all the industrial areas reported by JLL.
The South Auckland Industrial Precinct has witnessed a slight drop in vacancy over the last half of 2019, decreasing by 33 bps to 1.5%, which is the lowest of all the industrial areas reported by JLL. The slowing of the supply response and extremely low vacancy rates indicate that the South Auckland Industrial market remains a hot commodity between occupiers. The lowest vacancy rate seen within the South Auckland precinct was 1.2% in the Airport Corridor. This is the lowest vacancy that this area has recorded to date.
We expect these rates to soften over the short term as new developments come to market, although new construction will be mostly purpose-built for specific occupiers as construction costs continue to rise.
The total stock base has surpassed 5 million sqm over the last half of 2019 with forecasts of growth to 5.4 million by the end of 2023. This will eventually ease some of the demand pressure we see currently in the historically low vacancy rates.
The largest project progressing through the pipeline is the distribution centre for Foodstuffs. This development is to include 3 storeys of office space and 65,000 sqm of warehousing due to be completed in 1H21. There is currently over 130,000 sqm that is under construction due for completion by the end of 2020.
South Auckland combined industrial rents have stayed stagnant over the last quarter of 2019 with only the office component moving upwards slightly. Combined rents for prime space stands at $165 psm and secondary at $131 psm. These rates sit very close to the Auckland Central rates with prime at $167 psm and secondary at $136 psm.
Further yield compression was observed in the secondary assets while primary held flat. The lack of stock coming onto the market is keeping yields quite low with only 54 sales over $5 million recorded in 2H19, versus 82 in 2018. Prime yields sit at 5.13% and secondary at 5.88%.