Auckland, 20 February 2015 - Logistics and freight businesses looking to get the edge on their competitors in 2015 are being encouraged to plan their property strategy for their Auckland premises immediately - or risk compromising operational needs or running out of options.
CBRE New Zealand’s South Auckland team says 2014 was a transitional year for industrial property in Auckland and as such, there have been several significant shifts in the market that logistics and freight occupiers need to be aware of.
Paul Steele, Associate Director of CBRE New Zealand’s South Auckland office, says the overwhelming trend for 2015 is extremely low industrial vacancy.
“Our team is seeing low vacancy levels across all property grades and sizes, indicating strong demand and continuing growth. There’s certainly pressure on occupiers to plan well in advance before they shift premises or risk settling for second best.”
Mark Bramwell, Associate Director for CBRE New Zealand’s South Auckland industrial office, says that a company’s real estate strategy has never been more important than in the current market.
“The Auckland industrial property market is now in a similar state to how it was in 2005/2006, in buoyant pre-GFC times. There’s no doubt we are in a landlord’s market with limited stock available, therefore time and planning are of the essence when it comes to positioning your logistics and freight business for growth.
“Two years ago tenants and occupiers had their pick of existing stock, and could easily spend 18+ months waiting for a custom-designed facility.
“Now you have to be informed and act fast if you want to secure a property that will service your needs and drive your growth. The emphasis is on planning properly to ensure the most suitable options can be secured and quality, efficient space can be accessed.”
Bramwell says the flight to quality is still very evident and, despite rising demand and a good development pipeline, there is still a shortage of A Grade stock on the market.
“For the logistics and freight sector in particular, the efficiencies that come with a modern A Grade facility deliver tangible cost savings and more cubic capacity. As such, there is a lot of competition among the sector for these facilities.”
Steele says the key thing to keep in mind is that you need time on your side when it comes to your property requirements. “It is vital to have a clear and workable real estate strategy in place so occupiers don’t get caught out when their property needs change suddenly.
“If you leave your property search too close to when you need to move facilities, you will end up making compromises that could really affect your operational delivery and your growth aspirations.”
Steele says that as many logistics and freight companies tender / bid for work, gearing up with a flexible landlord and a property of the right size, location and specification is a necessity.
“For businesses that depend in part on winning work through formal tender and procurement processes, there is a need to have options to secure the right property, in the right location.
“If a bid has short time requirements, you need to demonstrate that you have access to a site or at least have options to take up or develop the space to service that tender. It therefore pays to engage with a broker who can connect you to the property options available at any one time and enable you to bid for work with full knowledge.”
Bramwell says recent changes to fire safety regulations have led to a bigger onus being placed on landlords to better understand a tenant’s business and how a change of use might affect their fire solution for that particular property.
“A thorough fire report can take a number of months to generate, not to mention any building changes or updates you need to do as a result, so that’s one more component you need to factor into your real estate planning for 2015.
“Given the margins that some logistics and freight businesses are working on, being across your property strategy is a necessity.”
Gergely Gaspardy, Research Manager for CBRE New Zealand, says there is a pipeline of some 250,000sqm of industrial space under construction at the moment, with around 80,000sqm of that hitting the market in the final months of 2014 and early months of 2015. However, much of the 250,000sqm is either design build or already precommitted, which means the amount of new stock available for occupiers is limited.
He says that CBRE’s market research shows an increase in speculative development, with around 27,000sqm under construction in Mount Wellington alone.
“Although spec builds are being created in a way not seen for some years, with James Kirkpatrick, Goodman and Auckland Airport all embarking on major speculative schemes with options ranging from 3,000-10,000sqm, CBRE is seeing high demand for them, with several organisations vying to occupy each premise rather than a sole tenant.”
“New supply could peak within the year, which would drive a number of changes. Vacancy will increase generally, but will remain low for Prime properties.”
Bramwell says the successful leasing by CBRE of over 52,000sqm of spec built space across six separate facilities in the final quarter of 2014, illustrates the market’s appetite for new stock, and with a number of inquiries still coming in, demand will continue well into 2015.
“In early to mid-2014 the first strong wave of spec development started to filter into the market, and after that was all leased, sold or precommitted so successfully, there’s now a second wave coming up right behind it. It signals a strong economy, and with the price of fuel reducing, freight and logistics businesses are gearing up for an even stronger 2015.”
Bramwell and Steele say the most useful way to stay ahead of the curve is to be aware and informed about the property market and how it affects your business operations.
Bramwell says: “We get in front of our clients regularly, and that gives them a tangible edge in the market. They know what’s going on, they know how much time they need to allow, and most importantly, they’ve got options when the need crystallises. We’re eager to ensure the rest of the market is aware of these pressures too.”
Steele adds: “It’s going to be a very tight market for occupiers over the next two or three years. We are urging our clients and the wider market to be prepared with the tools and information CBRE can provide.
“The market won’t wait for you to be ready, so we suggest engaging with a knowledgeable property advisor to ensure your plans are aligned with the market.”
View the FTD Magazine article here
ABOUT CBRE
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
