Cuts to the Official Cash Rate from the Reserve Bank of New Zealand have laid the groundwork for Auckland’s industrial property market to rebound next year.
Greg Goldfinch, National Director of Industrial Sales and Leasing at Colliers, says while the past 18 months have been slower following the frenzy of the Covid era, the market has begun to pick up in recent months.
“The buyer pool has progressively been growing since the Reserve Bank began cutting rates meaning now is the time to act as yields begin to firm,” Goldfinch says.
“Next year has quite an optimistic feel as we hope there will be a return to a normalised market.
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“Add-value investment opportunities have continued to generate enquiry throughout the year but as prospective buyers have money rolling off term deposits they may be looking to invest it in long-term passive plays given interest rates are falling.”
The Colliers Research team has released its latest industrial report for Auckland, which notes softer demand conditions have led to a slowdown in development activity. Resource consent issuance in the year to August 2024 approved the construction of 164 new industrial premises, down from 176 a year earlier.
However, interest in land sales is increasing, with developers positioning themselves in anticipation of the next growth cycle.
This has been reflected with strong sales figures for sites in the Spedding Industrial development in North-West Auckland, which is being marketed for sale by sites sales specialist Josh Coburn and the Colliers Capital Markets team. More than $180m worth of land is under contract at the development.
“Growing interest in the West Auckland market has been supported by continued interest in industrial land out south, including at Drury,” Goldfinch says.
“This is a promising sign for the market when owner-occupiers are also looking to acquire greenfield sites for their own developments.”
Industrial vacancy figures have risen slightly following the latest round of research from Colliers with the overall vacancy rate for the Auckland region sitting at 2.1 per cent.
While this has risen from the 1.75 per cent mark noted earlier in the year, it is still low by historical standards.
Ian Little, National Director of Research at Colliers, says the rise in vacancy reflects where the market is in relation to the economic cycle.
“Rental growth rates have moderated following record growth between 2021 and 2023. Average face rents for prime grade warehouses across the Auckland region as of September stood at $194 per square metre, up 2 per cent on September 2023,” Little says.
“New prime grade warehouse space continues to command new benchmark rentals reflecting elevated development costs.
“Given the generally challenging economic conditions, many businesses are examining their warehouse footprint.
“We expect to see a return to normal market activity with heightened transaction figures in the second half of next year as the Reserve Bank’s interest rate cutting cycle continues.”
Goldfinch says despite the end of the year being nigh, people are keen to get deals done before the Christmas break.
“There is still consistent interest and we are regularly speaking with clients to see what we can put together to close out the year strongly.”
- Supplied by Colliers