Smaller industrial units have become so popular that finding available stock is proving difficult.
The scarcity is underpinned by overall industrial vacancy rates of 1.34 percent in Wellington and 1.6 percent in Auckland, according to recent Bayleys research.
Bayleys Wellington director commercial Fraser Press says smaller industrial units in Wellington offer cheaper entry prices from the late $300,000s to mid $400,000s for units of about 50 square metres.
The majority of small units are sold to owner-occupiers, while many “lock and leave” units are used as passive storage for household goods, cars, boats, or artworks.
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As well as tradespeople, tenants also include professionals such as accountants, small businesses, and artists.
Press says most are used by purchasers, and a minority are leased out.
“There have been relatively few investors in this market due to tighter funding requirements by bank lenders.”
Construction is now underway on three developments in Wellington following successful marketing by Bayleys.
They include 84 units beginning at 51 square metres at Imperial Business Park in Petone where all but a handful have been sold between the late $300,000s to mid $500,000s.
Some of the architecturally designed units have frontages, allowing for showroom, retail, office and industrial uses.
The landscaped grounds offer easy access onto State Highway 2, close to the cafes and restaurants of Jackson Street.
The development on the former Imperial Tobacco site sits next to Mitre 10 Mega, Plumbing World and Gilmours, and near and near bulk retailers Kathmandu, Briscoes, Rebel Sports, Bunnings and Smiths City.
Bayleys has also been marketing 59 units at Takapu Rise at the northern edge of Wellington approaching Tawa adjoining the northern motorway network.
They have been built by Rosco Industrial, the same developer that constructed Imperial Business Park.
The units are between 85sqm to 91sqm with prices ranging from the late $600,000s to $700,000. The stud height means that owners can add a mezzanine floor.
Construction is underway and the development is due for completion in mid-2023.
At Porirua, a similar development of 80 units called The Works Elsdon is underway.
Bayleys North Shore commercial broker Richard Moors agrees that the industrial market generally is “extremely tight”.
Silverdale about 30km north of central Auckland has seen much of the micro-unit action over the past 18 months.
A significant number of the 74 strata freehold units in Peters Way were sold off the plans. They were priced from $269,000 plus GST and range in size from 40sqm to 124sqm, with mezzanines optional. Several have been on-sold.
About 60 percent were sold to owner-occupiers and the balance to investors, with “good leasing”.
Moors says the entry-level pricing means smaller industrial businesses can participate when they might have been priced out of the wider industrial sector.
The zoning allows for workshops, warehouses, distribution, storage, light manufacturing and fitness facilities.
With recent supply chain issues, it has also become more imperative for e-commerce businesses to have space to store.
The financial landscape is another driver of development and sales because banks look favourably on owner-occupiers, in some cases lending up to 100 percent of value.
By contrast, investors have struggled to obtain finance from banks, Moors says.
Another attraction is the more modest average lease terms for micro units which is more commonly about three to four years with rights of renewal.
“Lease rentals tend to be less based on a per square metre formula than pricing on a per-week basis.”
Wairau and Albany remain the pre-eminent industrial location in Auckland with a number of smaller units turning over.
Bayleys general manager commercial and industrial South Island, William Wallace, says limited stock means that smaller units in places like Sydenham near the Christchurch central city have moved quickly and have proved popular with tradespeople.
“It’s because of the price bracket. You’re not spending millions. It’s a great little investment, especially for owner-occupiers,” Wallace says.
“When we get one in Sydenham we usually get eight to 10 enquiries. Port Hills is popular and further afield there are opportunities at Wigram and Rolleston, which is becoming a mini city.
Bayleys Canterbury commercial and industrial broker Nick O’Styke says that over the past five years most micro-unit developments have been within major business parks at Rolleston, Belfast, Wigram and Hornby.
“We’ve seen big growth at Rolleston mainly at Izone Park and more recently at Iport Business Park. From a construction point of view they’re simpler too. They’re tilt slab with toilet facilities and a small office. Within a week or two of coming to the market they get snapped up,” O’Styke says.
- Article supplied by Bayleys
