A bullish outlook and record returns from primary produce — along with the growth of regional food belts — is underpinning opportunities in the industrial property sector.
A Situation and Outlook for Primary Industries (SOPI) report compiled by the Ministry for Primary Industries predicts that export returns from farms, orchards, forests and fishing is headed for a record of $42.2 billion.
National director for Bayleys Real Estate's industrial and logistics division, Scott Campbell, says the downstream impact could be seen in the associated significant capital investment into the manufacturing and logistics sectors, which would bolster demand for industrial property.
"New Zealand's industrial property sector is leveraging increased demand for packing, processing and cold storage facilities and warehousing sites," Campbell says.
"Concurrently, there is increasing demand from tenancies whose core business activity in the primary production sector is in the likes of logistics, or research and development. With primary export activities and revenues forecast to maintain their stellar run for quite some years to come, the opportunities for New Zealand's industrial property sector to continue to 'piggy-back' off land-based production are substantial."
Campbell is encouraged that industrial property is prospering in the provinces, compared big city growth more reliant on population-driven commerce. Bayleys' research confirms substantial commercial property expansion in regions with high levels of primary production growth:
Wine Marlborough general manager Marcus Pickens says multiple niche segments of the region's commercial property sector had benefitted from the strong performance of the viticulture and winery sectors. These include packing premises, large bonded warehouses, industrial buildings housing tenants involved in steel fabrication and engineering activities, and even residential construction.
"There's huge scope for industrial investment and we're seeing companies like WineWorks and the Bottling Company, for example staging their continued business expansion on the back of wine industry growth paths," Pickens says.
The general manager of stainless steel design and manufacturing firm Crown Sheetmetal, which specialises in steel vessels for the wine, dairy and food processing industries, Crichton Purdie, acknowledges the Marlborough-based operation is "growing nicely" on the back of the wine sector.
"In recent years, Crown has acquired a small local fabrication business and has taken over the facility of wine tank manufacturer, Taylors Engineering. We also grew our business after earthquake events, when repairs and strengthening of tanks was paramount," he says.
"Our company's growth is directly related to the growth of the Marlborough wine industry. As winery interests expand, so does the capital investment in winery infrastructure so there's demand for bigger tanks, and fruit handling equipment."
Crown leases high-stud industrial property in Blenheim across three sites – one in Cloudy Bay Business Park and two in Riverlands Industrial Estate.
Meanwhile, primary sector-focussed business Wakatū Incorporation has a diverse operations and commercial property portfolio which includes industrial processing and packaging facilities, vineyards, marine farms, orchards, residential properties, retail and industrial developments, and office buildings.
Its property interests span the Marlborough, Nelson and Tasman districts.
Iain Sheves, the general manager of Whenua, the property arm of Wakatū, says the entity leased industrial facilities, horticulture and water space to sister firm, the food and beverage business Kono, which also leases industrial facilities from other parties.
Kono grows, harvests and then processes mussels at its Marlborough factory. Its marine team recently moved into a new purpose-built building on the Havelock marina, which it leases from Port Marlborough.
"As businesses mature, they see opportunities for collaboration and growth through investment in plant and equipment, rather than being constrained by owning property," Sheves explains.
"In a fast-moving business environment, Wakatū can provide businesses with the facilities they need to scale up or down, while they optimise returns by focusing on their core business activities. This in turn leads to growth and development opportunities for our property business."
Pick of the bunch
Hawke's Bay is often referred to as the country's fruit bowl, with pip and stone fruit industries, and more latterly wine production, underpinning economic performance there.
The region's industrial property response to the prosperous horticultural sector has largely been through the construction and expansion of coolstore, packhouse and logistics developments.
For example, the emerging Tomoana Food Hub industrial precinct in Hastings is next door to industry-giant Heinz Watties' processing plant, and close to other significant in food production and processing.
Occupying a 16ha site which is zoned Industrial 7, Tomoana Food Hub has easy access to the Port of Napier and Tomoana Warehousing Ltd offers on-site third party logistics and overflow storage services to tenants.
Its development manager Logan Taylor says the land-holding/development company is working closely with the region's councils to further promote its 'food innovation hub' — a single, multi-tenanted building built specifically to enhance interactions between tenants of small and start-up businesses in the food, beverage and agri-tech space.
"Our challenge is identifying great small food businesses which have outgrown their existing (industrial) premises — often located in old retrofitted industrial buildings which don't quite meet today's standards — and getting them to take the leap into the hub," he says.
"Modern food (processing and manufacturing) spaces can be quite complex — from high-threshold hygiene areas, to complex drainage and ventilation systems – and that all comes at a cost."
Milking it in Canterbury
The Christchurch-fringe township of Rolleston has become a hub for processing and distribution in Canterbury's dairy sector — with white gold producers Fonterra, Synlait and Westland Milk Products all consolidating a presence there because of the industrial property and transport infrastructure available.
Westland Milk Products has value-add processing plants on both sides of the Southern Alps — encompassing infant formula dryers in Hokitika, and an ultra-high temperature processing (UHT) plant in Rolleston.
The company has 7.237ha in Rolleston's Izone Industrial Park. Housed on the site are its multiple processing activities — including a water-removal plant, warehousing, UHT plant, tanker reception and washing area, rail siding, and offices. Westland Milk Products is also a partner in Pure Nutrition Ltd, a joint venture with an infant formula canning company Ausnutria, which occupies a 2.5 hectare Izone site.
Westland Milk Products' chief executive officer, Toni Brendish, says Westland took into account a number of key factors when considering where to locate its UHT plant.
"Westland considered milk availability, obtainability of space to build the plant, closeness to transportation and warehousing facilities and distribution networks," says Brendish.
In order to future-proof its Canterbury presence and operations, Westland owns an area of undeveloped land it can expand on to at Rolleston, should the need arise.
Elsewhere in Rolleston, Timaru-headquartered cold storage venue provider Coolpak has expanded the company's operations into the precinct – occupying a three hectare site.
Coolpak business development manager Mark Exton said the company had enough room within its landholding that it could mirror expansion of the current facility within 24 months.