Hi <<First Name>>,
Welcome to our first edition of Market Update for 2016. In this newsletter, we cover the latest market intelligence for the local industrial market, including local valuers and property expert’s opinions on the current vacancy rates, rental rates and length of tenure. The thoughts below are a collaboration of my own experience in the industrial market and material which has been received from the generous valuers and property professionals we regularly meet and talk with.
The industrial sector throughout New Zealand is very healthy, it accounts for over 33% of the nation’s GDP and Christchurch is well placed to take advantage of this, being the second largest manufacturing centre in the country. Exciting and unprecedented times are afoot with a huge number of both large industrial and smaller service businesses relocating to purpose built premises within Industrial Parks to efficiently allow the business room for future growth, however as the migration continues we are seeing more ‘For Lease’ signs on existing industrial properties for longer periods than we have experienced in recent years. The industrial vacancy rate has definitely increased and they are not in any one particular location, we are seeing more and empty space come available within almost every industrial hub across the city. Prime grade vacancy is reported at 1.5% which we anticipate will remain steady and possibly decrease, although secondary stock is now over 3% and we expect this to grow further.
As a result of the increased supply of properties available for tenants, rental rates are not rising and remain steady. We are beginning to see incentive based deals available for the right tenant and long-term lease arrangements. Confidence in the medium to large speculative building has slowed however, smaller unit titles developments are selling successfully both from the plan and nearer completion time. The units with surplus office space/showroom areas are taking longer to lease than units with modest office/showroom areas and we put this down to simply affordability for the smaller service based businesses.
A valuer asked if we are seeing tenants lease terms shortened as a result of increased vacancy rates. It is hard to answer this question as it is correct for some properties, particularly within in the secondary grade, however, it’s not a blanket rule and we are seeing well-located prime grade industrial buildings lease for long tenure. The same valuer mentioned that unlike commercial space, industrial property has never really had a “fad” or change in identity for so long that generally speaking there will be someone for an empty property with little or no modifications, and we agree with this sentiment and believe that industrial property is an excellent investment.