Wellington industrial property vacancies shrink to a 10-year low
Source: https://www.stuff.co.nz/news/110585094/-

2019-06-11 16:45:28

Wellington is not only facing a residential rent crunch but a critical shortage of industrial space with vacancies at a 10-year low, according to new research.

The Wellington region has an overall industrial vacancy rate of just 1.5 per cent or 39,000 square metres, the lowest since Colliers International started doing the annual survey 10 years ago.

Colliers have called it a "shortage crisis" and warn it could hold back the region's growth while industrial rents will climb to a new high.

The main industrial area, Seaview, comprising more than a quarter of all industrial space in the Wellington region, has virtually no industrial space available with an unprecedented vacancy rate of 0.2 per cent.

Available industrial space had been shrinking for six years and was 12.6 per cent in Seaview in 2012, Colliers data showed.

While Seaview has the lowest vacancy rate at 0.2 per cent, other large industrial areas like Upper Hutt had 3.8 per cent, the highest in the region, Petone had 2.6 per cent and Porirua 0.9 per cent.

Colliers director of valuation and advisory services in Wellington, Jeremy Simpson, said 2019 would be another tough year for industrial tenants particularly if they were facing rent reviews and expiring leases.

Industrial rents had been rising strongly in recent years "but we expect that on the back of these latest vacancy results rents will move to a new high in 2019".

Simpson said the squeeze on industrial space was the result of strong business confidence in industrial and manufacturing sectors rather than the loss of space to bulk retail conversions, demolitions or acquisition of property for public works.

There were limited options for expansion that could impact on the sectors and region's growth, he said.

In addition, new industrial builds were being held back by rising construction costs and land prices making them unaffordable for most businesses.

Further out from the centre, though, less expensive land in Porirua and Upper Hutt was available and new builds were increasing.

"There has been more vacant industrial land sold in Upper Hutt in the last 12 months than in the last three years put together," Simpson said.

New industrial buildings were being constructed by owner-occupiers but there was also more enquiry from corporates searching for quality and earthquake compliant and resilient properties.

Major infrastructure development like Transmission Gully, already benefiting most of Wellington's industrial precincts, "seems to be creating a cyclical boom that shows no sign of slowing" he said.

Bayleys Wellington director Mark Hourigan said rents had been rising, "but I don't think they are going to gallop away."

The problem was the lack of land for new development in and around Wellington.

"Which is why for the first time in ten years we are starting to see new industrials being developed in the likes of Alexander Road in Upper Hutt.

"The demand is pushing people further afield."

Bayleys had been selling quite a bit of land in Upper Hutt recently for industrial development.

An experienced developer, Malcolm Gillies, was selling industrial land there. The sections are selling from $282,000 to $4.8m plus gst for the largest, according to Gillies Realty website.

Hourigan said another factor contributing to the shortage was the change of use from industrial to residential on some properties.

An example was the R S Lane panel beaters site in Petone which was sold to a developer who built apartments, allowed under the site's mixed-use zoning. Changing use from commercial to residential was noticeable in Petone's main street, Jackson Street, he said.

If you have a commercial property story to share, please email marta.steeman@stuff.co.nz

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