Brownfield sites - older and rundown industrial properties - are increas-ingly becoming the only option for businesses hoping to develop industrial premises in Auckland's more established industrial suburbs, says Justin Kean, director of research and capital markets for Jones Lang LaSalle.
Kean says a limited level of supply of new greenfield sites has seen land values continue to grow despite very few transactions and the extremely low supply is matching the low levels of vacancy.
"The dynamics of extremely low supply and a stable level of demand indicate that the market is likely to see a significant increase in redevelopment pressure on brownfield sites," Kean says. "This is especially the case in older industrial suburbs such as Mt Wellington, Ellerslie, Penrose, Wairau and Onehunga with desirability and demand driving this development cycle in an evolving market.
"There remains a significant amount of economically obsolete industrial space in these older industrial suburbs. These sites, typically developed in the 1970s and earlier, do not provide the functionality now required by modern industrial users."
Paul Steele, industrial broker for Jones Lang LaSalle, says Mt Wellington in particular is witnessing the trend. "One example of a great opportunity for redevelopment is 159 Marua Rd, Mt Wellington. This site occupies 6000sq m and currently consists of two older buildings which we expect potential buyers will be keen to develop. It offers the flexibility to redevelop with a variety of possible outcomes. The whole of the original site could be demolished and rebuilt; or the two front buildings could be retained and modernised while a new structure is built at the rear," Steele says. Ben Pilley, who is working with Steele to sell the 159 Marua Rd property, says a brownfield site was found last year in Mt Wellington for Ceres Organics. The 9609sq m site at 82 Carbine Rd allowed Ceres to build the first BioGro-certified organic warehouse and distributor of fresh organic produce in New Zealand.
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"When tenants vacate older stock, more often than not the premises remain vacant for extended periods of time," Pilley says.
"Redevelopment is being favoured by owners in order to attract occupiers and maintain healthy rental levels upwards of $100 a square metre.
"Mt Wellington will likely continue to supply a large number of redevelopment sites in the face of a limited stock of vacant business land."