Auckland's industrial property market is starting to mirror its residential property market, with a shortage of stock and property prices rising faster than rents, forcing investor yields down - while Wellington is attracting out of town investors and supply is catching up with demand in Christchurch, according to Colliers International.
Colliers' latest industrial market report says that rising rents and yield-hungry investors competing for a limited number of properties are a feature of the industrial property market (warehouses, factories and the like) throughout the country.
"The main centres of Auckland, Wellington and Christchurch keep hitting new highs across most indicators, with provincial cities also reporting solid demand," the report says.
In Auckland the overall industrial vacancy rate ranged from 0.9% in the airport precinct to 3.7% in Penrose/Onehunga, while rental yields ranged from 6.1%-7.35% for prime grade properties to 6.75%-8.85% for secondary grade premises.
In Wellington the overall vacancy rate ranged from 2.9% in Porirua to 11.7% in Upper Hutt while rental yields on prime properties were 7%-8% and on secondary properties 8.5%-11.5%.
In Christchurch the overall industrial vacancy rate ranged from 1.6% in Hornby/Islington to 6.5% in Sydenham while rental yields ranged from 6.5%-10% for prime properties and 7.75%-12.5% for secondary ones.
The report said the regional vacancy rate in Auckland was at a record low of 2.6% and rents were expected to rise another 2-3% this year, although prices would likely rise by more, pushing yields down by between 0.25% and 0.5%.
"Wellington is an industrial investor hotspot as investors look outside traditional markets and back a positive long term growth story, while owner-occupies take advantage of cyclically low interest rates," the report said.
"The rebuild of Christchurch continues, adding significant pressure on resources.
"However as construction peaks, recent rampant double digit value growth for industrial rents has slowed and plateaued as supply catches up with demand.
In a Double Shot interview (see above) Colliers director of industrial sales and leasing, Greg Goldfinch, said the vacancy rate in Auckland was the lowest he'd ever seen and, from a practical perspective, it might as well be zero for good quality properties.
Most speculative developments were being leased before they were finished and he expected that trend to continue.
Industrial tenants who were likely to need new premises or more space needed to be thinking two years ahead, he said.
"The sooner they get on to it the better, because the issues we're are facing are only going to increase as we get through the next couple of years. We have a real vacancy problem."
Goldfinch said that landlords were also cutting back on lease incentives, and over the course of this year they could be halved from where they were a year ago.
However, the weight of capital pouring into the industrial property market meant that prices were likely to keep rising faster than rents.
"We have an avalanche of money waiting to be placed in the industrial market, and with the well tenanted investment stock that investors are all chasing - we have very little of it, and that's putting pressure on our yields and driving prices up," Goldfinch said.
Click on the link below to read Colliers full report, which includes a summary of industrial vacancy rates, rents and capital values in the main industrial centres around the country:
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