Despite recessionary economic conditions impacting New Zealand across the past 18 months, industrial vacancy rates in Wellington have remained low due to a handful of key factors.
The constrained supply of industrial land throughout the capital has been a prevalent theme for a number of years and with next to no bare land available for purchase in Upper Hutt, Lower Hutt, Wellington, or Porirua development opportunities have remained scarce.
Industrial stock levels have also been reduced through the conversion of existing properties to large format retail offerings.
Longer term, there is the prospect approximately 30businesses in Cornish Street in Petone may need to relocate if the Government pushes ahead with the Petone to Grenada Link Road that is categorised under the Roads of National Significance designation.
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Research from Colliers that was released earlier this year pinned the vacancy rate for industrial property in Wellington at 1.2 per cent.
Tim Julian, Associate Director of Industrial at ColliersWellington, says the industrial market in the region has remained resilient inthe face of a challenging year.
“One positive for landlords across the past 12 months has been a reduction in insurance costs, which had been doubling every three to four years since 2016 due to natural disaster concerns,” Julian says.
“The drop in costs will be gratefully received by prospective buyers as they run their numbers on purchasing opportunities.
“While the vacancy rate remains low, there has been limited demand for the available space and this suggests businesses have been strategically examining their spacing requirements amid tricky trading conditions.”
Kieran Lennon, Associate Director of Industrial at Colliers Wellington, says one specific corner of the market that has held its value are smaller-scale industrial buildings generally measuring 1,500sq m or less.
“These types of premises have seen next to no drop in value since the peak of the market in 2022 due to continual rental increases across the previous decade,” Lennon says.
“This has created a scenario where many owner-occupiers are searching for properties of this size to be able to control their own destiny and not be bound to lease agreements and potential rent rises.”
The Colliers Wellington Industrial team has transacted multiple properties this year, including the three highest-value industrial assets that were sold (to date) with each property selling for over $10m.
One standout deal was the sale of a large-scale site in Grenada North with a sale and leaseback agreement in place for Fletcher Building.
The new owner was able to acquire the property with part of it vacant for a highly competitive price, indicating the strength of demand from owner-occupiers in the Wellington market.
Ben Taylor, Industrial Sales and Leasing Broker at Colliers Wellington, says as we move into 2025, the overall market sentiment is likely to improve as the Reserve Bank continues to make cuts to the Official Cash Rate.
“Falling interest rates anticipated by economists and most market participants must provide a more positive environment over time,” Taylorsays.
“This interest rate relief may provide an opportunity for businesses and investors to recalibrate their balance sheets in anticipation of an economic recovery.”
- Supplied by Colliers
