Snapshot Q4 2019
Despite a chronic shortage of quality industrial property stock, we did not see material rental increases in 4Q19.
Vacancy rates have continued at an unprecedented low of 2.8% overall as demand remains elevated for the sector. Only Petone saw a notable increase in vacancy, though even this area remains at a markedly low vacancy rate of 3.9%. Notably, both Grenada North and Porirua have remained at structurally low vacancy levels of 2.2% and 1.5% respectively.
Going forward into 2020, it is expected that this low vacancy will remain a constant factor, especially with a very limited amount of stock in the development pipeline at various stages of planning and construction.
There is a chronic shortage of quality stock in Wellington, due primarily to geographical and topographical constraints ensuring that the industrial footprint remains relatively tight across the city. It is anticipated that areas further away from the CBD will be considered over closer areas for development going forward, though practical infrastructure does remain a limiting factor for Wellington at a regional level.
Despite a limited industrial footprint, we have not seen material rental increases in 4Q19; we therefore prefer to report stable rental numbers set against a context of slightly escalating operational expenses. The average prime rate remains at $148 psm, with the warehouse component consolidating movement from earlier in the year. Secondary rental rates sit at the $100 psm mark again in 4Q19.
Yields have again remained unchanged with little transactional evidence to support any changes in the last quarter. Prime yields currently sit at 7.38%, with secondary yields at 8.75%. Capital values have remained similarly stable, with very little change between 4Q19 levels of $2,237 per sqm and the $2,264 per sqm reported in 3Q19. The chronic shortage of stock means that while investors are prepared to consider acquisitions, there is little available to buy.