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South Auckland industrial zones widen out as occupiers search for space

5 April 2016
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Lack of Prime space leads occupiers to widen their search for space

Auckland, 5 April 2016 - For a second consecutive year, take up of Secondary quality industrial space in Auckland has been higher in East Tamaki and Wiri than in Mt Wellington and Penrose as industrial occupiers look further afield to meet their larger footprint space needs, according to CBRE’s latest Auckland Industrial MarketView research.

The research shows that Auckland industrial space available for lease has been continuously decreasing in the last two year.

Prime industrial vacancy currently now sits at 0.6% 

With limited options in terms of number of premises and overall size. This is despite a healthy supply pipeline, which added more than 300,000sqm of new space to the market over the last 18 months. 

The reasons why these additions didn’t create more options for occupiers are: 

  1. About 80% of the new supply is design-built, pre-committed development, and 
  2. In many cases the new buildings are catering for business expansion rather than relocation and therefore occupiers don’t leave backfill space behind.

​Secondary grade vacancy is 2.5%

The Secondary market offers more options for lease, especially in the larger central South Auckland suburbs. However, many of these options have been vacant for at least 12 months, indicating limited occupier demand for many of these premises.

The reasons behind the increase in Grade B quality demand in East Tamaki and Wiri include:

  1. A lack of readily available Prime quality options, pushing occupiers towards lower quality buildings in order to accommodate business expansion.
  2. Logistics companies taking up around 75,000sqm of Secondary grade space in 2015, in addition to the more than 100,000sqm of Prime quality demand. Over 56% of the Secondary takeup took place in East Tamaki and Wiri, with less than 17% in Mt Wellington and Penrose. 
  3. Available Secondary grade stock is materially different in East Tamaki and Wiri than in Mt Wellington and Penrose. Although the latter two suburbs are seen as suitable locations in general, the functional obsolescence of a substantial part of the vacant stock in these areas orients occupiers towards more outlying suburbs where the options available are better in quality and more functional.

Zoltan Moricz, Senior Director of New Zealand Research for CBRE, says: “Although occupier preference for good quality is stronger than for low cost space, current rents show that in the better quality Secondary grade segment the difference between the rent of a building in East Tamaki can be 5-6% cheaper than in Mt Wellington and Penrose. In the case of Wiri the difference is above 10% which explains why some occupiers turn to suburbs where space is more affordable.

“Penrose and Mt Wellington continue to be sought-after locations but these areas don’t currently have the right product for occupiers. Therefore we see - especially in the better quality Secondary grade segment - more activity in other suburbs. 

“Most of the new industrial developments in recent years took place in East Tamaki, Wiri and at the Airport. These areas are increasingly seen as the new industrial centres where major occupiers expand and relocate to. This has clearly lifted the appeal of these areas, contributing to the fast takeup of many Secondary grade options available.”

CBRE is offering 81A and 81B Westney Road in the Airport Corridor as a sublease opportunity, available separately or together. This facility, which is the largest A Grade industrial facility currently available for occupation in May in Auckland, has a total building and canopy area of up to 23,957sq m, a high stud and high floor and yard loadings. The complex was constructed in 2014 and has considerable exposure to George Bolt Memorial Drive.

Claus Brewer, CBRE’s National Director of Industrial and Logistics, says that the property exemplifies the scarcity of large footprint Grade A facilities in the Auckland industrial market - and that the reality is that it is now a market much wider than traditional precincts. 

“Auckland’s industrial investment and occupier market is becoming increasingly cramped, and large format users are looking further afield than Manukau. This year we can expect to see continued interest in Auckland’s traditional industrial locations, such as the Auckland Airport corridor, the central corridor, Takanini and Wiri areas.

“We will also see industrial investors and occupiers looking even further out, at Drury and Pokeno. We can also expect Hamilton and Tauranga to experience strong growth – It is positive to see the signs of strong activity occur further south of Auckland, which has long experienced those high levels of growth.

“Today we are dealing with a very different market than it was five years ago, so for businesses looking at the possibility of moving, it’s important to consider their options at least two years from expiry.”

View the New Zealand Herald article

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