Industrial vacancies heading down

Vacancy rates across all Auckland's major industrial precincts appear to have passed their peak, according to an occupancy survey by Bayleys Research.

The survey found that industrial vacancies were within a narrow band of between 3 per cent and 8 per cent across seven key precincts, with an overall vacancy figure of 5.95 per cent.

Bayleys Research senior analyst Ian Little says the main reason industrial vacancy rates have remained relatively low over the past five years has been the fast reaction of the development and construction sectors, which quickly shut off the development pipeline once a downturn in the market was evident.

This contrasted significantly with Auckland's office sector, which, because of its longer construction timeframes, had major projects commissioned before the economic slowdown being finished, adding to the total inventory through until late 2011.

Little says the improved occupancy rate has also been helped by increased leasing activity led by the distribution sector, but with space also being taken by manufacturers and by the continuing acquisition of empty space by owner-occupiers.

Another effect of the pickup in leasing activity is a reduction in leasing inducements.

The Bayleys Research survey encompassed six major Auckland industrial precincts, the Airport (including Airport Oaks and Airpark), Wiri, Penrose, Mt Wellington, East Tamaki, Rosebank Rd in West Auckland, and the Albany Basin on the North Shore.

Penrose, with just over 3 per cent vacancy, has the lowest vacancy figure.

Little says this figure probably reflects the fact that most of its properties are smaller units so individual vacancies have a relatively minor impact on overall vacancy. Neighbouring Mt Wellington, by contrast, features many large format buildings and had the highest vacancy rate, although the figure is still relatively low at about 7.5 per cent.

The Rosebank Rd precinct has the second-lowest vacancy level at just under 4 per cent. The Airport recorded a vacancy figure of 7 per cent - down slightly on the 7.2 per cent recorded by Manukau Council in its final survey in 2010 - while East Tamaki registered a sharper fall from 7.7 per cent in 2010 to 4.6 per cent. Total vacancy across the Albany precinct - North Harbour, Rosedale and Mairangi Bay - fell to 6.6 per cent from 8.25 per cent last year.

The largest contributor to the decline was the North Harbour Industrial Estate, where it fell from 9.4 per cent to 6.9 per cent.

Bayleys North Shore Commercial director Nick Howe-Smith says multiple offers on premises being offered for lease are now common - with anything from two to four parties vying to secure the same premises.

He says landlords are achieving asking rentals in more instances, and incentive levels are being pegged back to the point where they have all but disappeared for top-quality offerings.

Howe-Smith estimates that effective rentals for Grade A and B industrial space on the North Shore have recovered by about 10 to 15 per cent from the bottom of the market a few years ago.

He says increased competition means leases are lengthening.