Overall vacancy for Auckland region increases minimally by 80 bps

• After decreasing every quarter since December 2020, vacancy rates across most precincts increased minimally during the second quarter of 2023. Overall vacancy for the Auckland region increased from 0.6% to 1.4%. This ended the trend of Auckland’s industrial vacancy being less than 1.0% for the first time since December 2021.
• However, tenants still competed strongly for space, with demand particularly robust for well-located and modern facilities as occupiers considered long-term efficiency and sustainability strategies. As a result, the Auckland region’s absorption for six months, ending in June 2023, stood at about 179,300 sqm.

During the last six months, 274,200 sqm of stock completes

• Notable completions include a 29,448 sqm warehouse for GPC at 20 Puaki Drive in Wiri, a 12,100 sqm warehouse for Martin Brower inside LOGOS’ industrial estate at 11 Puaki Drive in Wiri, a 8,500 sqm warehouse for Arnotts by Stride at 437–439 Rosebank Road in Avondale, and a 8,800 sqm warehouse for Davis Foods at 5 Gabador Place in Mt Wellington.
• The Tawharau Lane multi-warehouse development by Goodman inside Highbrook Business Park was also completed, consisting of four warehouses, with one each leased to Stanley Black & Decker, pH7, Garmin, and Chemist Warehouse, resulting in a total letting area of 20,100 sqm.

Prime yields soften again, up 25 bps during the quarter

• There were four notable transactions reported in this market for 2Q23. The most notable one was the sale of 29 Clemow Drive, Mt Wellington, a 3,210 sqm property, which sold for NZD 25 million. Another transaction was the sale of 82 Kerwyn Avenue in East Tamaki, a 4,010 sqm property that sold for NZD 10.49 million.
• The softening yield cycle resulted in average net prime yields increasing by 25 bps in the quarter to 5.3%. They are expected to soften by a further 12.5 bps by the end of 2023. Secondary yields also softened and now stand at 6.31%. They are expected to soften by a further 25 bps by the end of 2023 to reach 6.56%.

Outlook: Projects with leasing area over 570,000 sqm in development

• Notable developments include 109–136 Hugo Johnston Drive, Penrose, with 70,000 sqm for Mainfreight; warehouses at Landing Business Park, Mangere, pre-leased to Agility and Coca-Cola totalling 16,750 sqm; a 22,630 sqm warehouse for Fisher & Paykel at 15 Maurice Paykel Place, East Tamaki; and a 17,992 sqm parcel-processing centre for New Zealand Post, to be developed in Albany by Goodman.
• The cost of construction still constrains developers and owners as they consider design options for new builds and redevelopments. In addition, the shortage of land remains a considerable constraint for Auckland City and North Shore. On the other hand, we have seen a small decrease in land values, which may provide some reprieve for developers and owner-occupiers wanting to expand to new sites.