Massive growth in the Canterbury industrial sector has prompted expanding businesses to look for bigger premises.
Elliot Clayton, Industrial Broker at Colliers Christchurch, says the past six months have been marked by a high number of substantial leases, particularly in the logistics, transport, and manufacturing sectors.
“Demand heavily outweighs supply. Recently we haven’t had a problem with stock but now there’s a very real supply shortage,” Clayton says.
“In previous years, tenants looking at relocating had multiple options to choose from. But supply is tight now and that’s going to be interesting moving forward because you can’t fix that quickly.
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"On average, it takes more than a year for projects to come onstream and in Christchurch we have very few developers who spec-build without pre-commitment from tenants. The current shortage we’re experiencing is likely to remain for years to come.
“Quality space suitable for larger tenants is being snapped up. Some landlords have identified the need for larger premises and gone out and taken a calculated risk on building new premises to meet modern requirements.”
For instance, late last year Clayton relocated the South Island distribution centre of Mico, New Zealand’s largest provider of plumbing and bathroom products, to bigger premises in Christchurch at 17 Islington Avenue. The new spec-build comprises 4,890sq m of net lettable area providing up to 4,000 pallet spaces with 1,800sq m of yard.
Last month, a spec-build of 3,593sq m in Kennaway Road was quickly leased before completion to a global refrigeration manufacturer seeking a new distribution centre.
In another substantial new lease, Citycare Water has signed the lease for their new Hazeldean Road facility. Citycare Water is the country’s largest three waters provider of construction and maintenance of water, wastewater, and stormwater networks. Its new premises comprise 2,262sq m of warehouse area, 1,266sq m of office space, and 5,209sq m of yard.
Commercial construction product distributors Potter Interior Systems have leased the former 3,952sq m Placemakers site in Antigua Street.
Clayton says several new builds becoming available next year will relieve a small amount of the pressure, but a lot of users have urgent requirements for above 2000sq m.
With vacancy rates falling to historically low levels, upward pressure is being applied to rents.
“We’ve already seen an increase in industrial rents due to the limited supply coupled with rising inflation, which will keep rental growth rates high. Until recently, landlords would tend to favour fixed annual increases to their rentals ahead of CPI-based reviews,” Clayton says.
“However, with inflation running the way it is, we are seeing a lot more CPI reviews and more regular market reviews being sought.”
- Article supplied by Colliers
