Wellington industrial property thriving

The Dominion Post, November 18 2014

Industrial property vacancy rates in Wellington have fallen from the past three years and now stand at just 5.6% according to a survey carried out by Colliers International.

Colliers valuation director Jeremy Simpson said the company inspected 2.6 million square metres of industrial property in 12 precincts in the Greater Wellington area.

“This is the equivalent of 54 Westpac Stadiums and the total industrial floor area is nearly twice the size of the Wellington CBD office stock.”

Wellington has the third largest concentration of industrial related building stock in the country. It has a total of 2.9 million sqm or 7.6sqm per head of capita which is in line with Auckland at 7.7sqm and slightly more than Christchurch at 6.7sqm.

Simpson said the 5.6 % vacancy rate recorded in October was down on the 6.9 % figure recorded in the 2013 survey.

“This is the third consecutive year that vacancy rate has reduced. It represents approximately 34,00sqm of more space occupied in 12 months.

“The greatest improvements was seen in Porirua where vacancies reduced by over half from 2013, closely followed by Seaview/Gracefield which was a very strong performer also with the vacancy rate dropping by a third from 2013.

“The worst performer was Upper Hutt where the vacancy rate is nearly double that of the next highest precinct.”

Seaview/Gracefield is the largest local industrial area and accounts for about a quarter of all Wellington industrial building space.

Its vacancy rate has fallen about one-third from 8.4% in 2013 to 5.6%.

“This represents around 18,000sqm of space or 21/2 rugby fields.”

Much of this accounted for two substantial leasing’s – The BJ Ball lease of the 11,000sqm former Masterpet premises and he Retko Transport lease of the 12,000sqm Barlow Freight premises.

Both properties are in Bell Road South. Simpson said building stock in Seaview/Gracefield increased by some 8000sqm with the completion of a new property at 143 Hutt Park Road. Masterpet has a 12year lease on the property which was recently sold to PFI (Property for Industry for $15.267 million at a yield of 7.6%.

“This is a confidence boost for the Wellington industrial market being the first listed property fund to purchase industrial property in Wellington for some years and is the highest price paid for an industrial property in Wellington since 2007.

“We are noting increased inquiry from such institutions and upper North Island purchases who are seeking greater returns than they can currently achieve in Auckland, Hamilton and Tauranga.”

In Petone and Alicetown, which account for about 20% of Wellington’s industrial property, the vacancy rate has fallen from 4.8 to 4.1% in the past year.

“There has been strong owner/occupier take up…and this will put further pressure on tenants seeking space, and rental levels.”

Simpson said Petone was gradually changing, with industrial properties becoming converted to retails, storage, childcare and residential use.

Briscoes Group plans to put new Briscoes and Rebel Sports stores at the Colgate-Palmolive site. Bunnings is also planning to set up a new wharehouse at the Te Puni Mail Centre property.

“We are aware of a number of major retails tenants currently negotiating on sites in Petone.”

Upper Hutt, which has 13 percent of Wellington’s industrial floor area, has the highest vacancy rate at 11.7%. Half of this vacant space is in the former GM plant in Alexander Road and if that was leased the vacancy rate would fall to 6.5%.

Porirua, which has 12% of Greater Wellington’s industrial space, saw a big drop in vacancies from 6 to 2.9 % in the past year.

The area’s biggest industrial building, the 51,000sqm former Mitsubishi plant, is now full after recent leases to Fusion Interiors, Placemakers, NZ Post, Hannahs Shoes, Downers and Conroy Removals.

“Porirua comprises a high proportion of smaller premises too and there has been increased owner-occupier purchasing in recent times,” said Simpson. “There has also been a notable increase in demand from construction and contractor-related businesses which we attribute to the major roading projects which have commenced including the Kapiti Expressway and Transmission Gully.

“Not only is the vacancy rate trending downward but business confidence is improving, building insurance premiums are coming down and development activity is increasing.”