Experts from New Zealand's largest full-service real estate agency have produced the first in a series of reports examining the impact of infrastructure development on the commercial and industrial market.

Bayleys Infrastructure Series will focus on how initiatives being rolled out throughout the country will influence commercial real estate.

The series is being spearheaded by Ryan Johnson, Bayleys director commercial and industrial, and Ian Little, director of Bayleys Research. They're supported by divisional heads across the 16 service arms of Bayleys.

Johnson says New Zealand's economic growth, low unemployment rate, historically low interest rates, and active development sector are all contributing to change across the property sectors.


Infrastructure is also playing a role. "While in many parts of the country there's an infrastructural catch-up game underway, in other cases, infrastructure programmes are leading the way and determining new growth areas," he says.

"This is particularly true for the industrial market where burgeoning logistics and supply chain operations, a thriving primary sector and e-commerce trends are driving property expansion into former greenfield sites, once largely rural areas such as Drury, south of Auckland, and into the regions."

He says large-scale infrastructure projects will have a significant impact on the built-environment, help improve productivity, and have the potential to redefine towns and cities.

The first report in the series looks at New Zealand's economic "golden triangle" — the Auckland, Waikato and Bay of Plenty regions — and profiles industrial property fundamentals within that area.

The triangle houses the majority of the nation's population, generates most of New Zealand's gross domestic product, and is in scale-up mode.

"Recent years have seen high levels of business expansion and job creation within the zone and this has in turn fuelled demand for workspace and driven a surge in development activity," says Johnson.

"Demand for industrial property within the golden triangle is underpinned by the country's two busiest sea ports — Tauranga and Auckland — and the country's largest international gateway Auckland airport.

"Unprecedented growth in this evolving zone means that much of the national infrastructure spend is being directed towards the golden triangle, reflecting the pivotal role it plays in New Zealand's economy."


Ian Little says New Zealand Transport Agency (NZTA) figures show that 56 per cent of national freight movements pass through the upper North Island, while about 35 per cent of the country's exports go through Tauranga's port.

"Given these fundamentals it is not surprising that, of the $129 billion earmarked for infrastructure projects over the next 10 years, about $100 billion is to be spent on projects within the golden triangle, with $55 billion on roading and land transport projects," says Little.

Major projects include the $2 billion Waikato Expressway and the $268 million Southern Corridor Improvements Project covering the stretch of Southern Motorway (SH1) from the SH20/ SH1 connection at Manukau to Papakura.

These initiatives have been preceded by the Western Ring Route, an alternative motorway connecting new industrial precincts in the north/ northwest with the airport and south Auckland industrial precincts.

The most significant project in the Bay of Plenty is the $102 million Baypark to Bayfair upgrade, where two flyovers built on SH2 by 2020 will improve the route to the port of Tauranga and complete what is known as the 'Eastern Corridor'.
Scott Campbell, Bayleys' national director industrial and logistics, says despite a sharp uplift in industrial development within the golden triangle, heightened demand has run ahead of new supply.

"Bayleys Research vacancy surveys show the combined vacancy rate across the three cities was historically low at just 1.8 per cent, with marked decreases noted across each city," says Campbell.

"The development sector has responded to a call for space and we've seen construction activity ramping up over the last two years.

"However, a shortage of development land has been a handbrake in the Auckland market and the rising cost of land has forced development outwards to the fringes."
Campbell says the Waikato freight hub in Horotiu and the planned Ruakura inland port will address some of that region's shortfall.

"These new hubs will bring logistical and supply chain benefits, a lowering of freight costs and, through the better utilisation of rail, a reduction in carbon emissions."