Record low vacancy for industrial property

Traditional industrial hubs like Mt Wellington are experiencing record low levels of vacancy. Photo / Supplied

JLL Research says industrial is the strongest performing sector in Auckland with vacancy sitting at 2.1 per cent - the lowest level observed since the agency's records began in 1993.

Tom Barclay, JLL's associate director of research, says Auckland's industrial market is experiencing a prolonged bull-run, with a number of new areas increasing their industrial capacity in an effort to satisfy pent-up demand.

One such area is northwest Auckland which includes Hobsonville, Westgate and Kumeu.

"This is the first time we have tracked the northwest area of Auckland," says Barclay. "It's a decision we made following the area's rapid growth and attractive future prospects for the industrial sector as an alternative to the established precincts.

"The traditional industrial hubs like Mt Wellington, Penrose, East Tamaki, Wiri, Wairau and Rosedale are all experiencing record low levels of vacancy. With limited greenfield development land and low vacancy rates, new industrial development is being driven further south of Auckland but also to the northwest, which is proving a viable alternative for some North Shore businesses."

The northwest has access to greenfield land ripe for development and, following the completion of the Waterview Connection and the Western Ring Route, the transportation links are all in place drawing industrial businesses to the area.

"Now is an opportune time for businesses or owner occupiers to consider their options to design/build a premises in the northwest. With the government committed to supporting infrastructure in the area, securing a position should see benefits in the future from the increased workforce and connectivity provided," says Barclay.

In contrast to the northwest, south Auckland is a well-established industrial area and has been experiencing high levels of demand over the past five years.

"We expect south Auckland to be the main contributor to industrial development for Auckland through to the end of 2020. We are tracking about 419,000sq m of new supply in the Auckland development pipeline. Of this total, around 273,000sq m is under construction while the balance is either consented or in planning," explains Barclay.

"While there is a significant portion of the development pipeline attributed to speculatively built stock, the majority of properties are being leased up prior to completion. Businesses looking to relocate to new industrial premises need to be thinking ahead of the game to secure a suitable property.

"Beyond 2020 we expect to see development move further south as land is chewed up in East Tamaki and the Airport corridor.

"Landlords are in a favourable position across the wider Auckland market. The average combined rate for prime stock sits at $144 per sq m. We expect this to increase to $149 per sq m by the end of 2018 and to $154 per sq m by the end of 2019," says Barclay.

He says the industrial sector has seen record levels of transaction volumes, with over $900m of transactions in 2017. Major transactions include the likes of the TIL Properties Portfolio which PFI purchased for $69.5m; Augusta's divestment of 100 Carbine Rd for $36.8m and Toll's purchase of the Fletchers' site in Otahuhu for $59.5m.

Tom Barclay of JLL.