Industrial property still shining bright despite increase in vacancy

The Christchurch industrial market remains one of the strongest commercial property sectors in New Zealand, with very little space available despite the vacancy rate having crept upwards.

Latest CBRE research figures show that just 1.7% of industrial property space in Christchurch is vacant (at December 2024), up from 1.4% in June. 

Hamish Clarke, Industrial & Logistics Director at CBRE, said vacancy in Christchurch industrial property is among the lowest of any city in New Zealand (just above Auckland’s vacancy rate of 1.6%), illustrating the underlying strength of the local market.

“Occupier demand and limited availability of industrial property in Christchurch has meant vacancy is still very low and rent levels have remained stable,” he said.

“Reduced consumer spending and economic challenges have forced some logistics firms to downsize their premises, but this hasn’t had a material impact on the overall availability of space.”

These fundamental strengths mean industrial property is still by far the most popular investment sector in the local commercial property market.

Transaction numbers reflect this strong investor preference towards industrial assets, with over half of all commercial property investment transactions in Christchurch in 2024 involving industrial assets. 

“Good demand from owner occupiers, as well as from investors looking for high quality investment properties with good tenants and lease terms is likely to continue to generate continued healthy levels of transactional activity in the industrial market this year.” 

Improved borrowing conditions are also expected to encourage syndicators and institutional investors to return to the market, which may result in more large-scale assets changing hands following a few years of reduced investment activity at the higher-value end of the market. 

One notable exception last year was Booster Kiwisaver Scheme’s $64m purchase of a large logistics facility at 32 Iport Drive, Rolleston, brokered by CBRE.

While industrial property rents were static in Q4 last year compared with Q3, over the year as a whole, rents on prime grade premises increased by 1.6% and secondary rents rose by 0.9%, said Jorge Chang Urrea, Research Manager at CBRE.

“Rents are stable but an increase in new supply of industrial premises may put some downward pressure on rents this year.” 

Around 4,300 square metres of new industrial space that entered the Christchurch market in the second half of 2024 remained vacant, representing almost a quarter of the total new stock.

Pre-commitment from tenants for new developments currently under construction and/or with building consent stands at around 50%. Most new development activity is in Hornby and Rolleston. 

Expectations of an economic rebound and increasing consumer confidence are contributing to a “positive but cautionary” mood among industrial occupiers, said Clarke.

“Manufacturing, transport and logistics operators are still feeling the effects of the economic downturn and we may see more occupiers look to downsize their property footprints to reduce costs. However, the uptick in consumer confidence is already contributing to greater optimism in the market this year and this should continue to build as interest rates fall.”