Wellington industrial vacancies drop again
Ngauranga Gorge, one of the smaller industrial precincts, has been volatile.
Vacancy across the Wellington region’s primary industrial precincts fell by nearly a full percentage point over the last 12 months for the second year running, says Bayleys Research.
Overall vacancy in the agency’s latest survey sat at 6.4 per cent compared with a 2013 total of 7.4 per cent, says Ian Little Bayleys senior research analyst,
“This marks the second year in a row that the vacancy rate has fallen following six years of increases from 2006,” Little says. “Vacancy now sits at its lowest level since 2010 when the overall figure was 6.15 per cent.”
Little says an improving economic backdrop leading to business expansion has driven down industrial property vacancy rates across the Wellington region. And the lower vacancy, particularly in modern, higher grade premises, has seen rentals begin to rise for the first time in a number of years.
“The fall in vacancy has resulted in upward pressure on rental rates becoming evident for the first time since the Global Financial Crisis [GFC]. Landlords have also benefited from reductions in insurance premiums, with falls of approximately 30 per cent being reported for some buildings,” Little says.
Wellington’s economic performance has been relatively flat in recent years compared with New Zealand as a whole which has largely been influenced by the performance of Auckland and Christchurch. However, an improved economic backdrop across the region was now clearly reflected by the industrial vacancy survey results.
“Employment numbers within the region have recovered to close to their pre-GFC peak. Annual Gross Domestic Product growth in the region averaged 1.8 per cent over the 2009-2014 period and this is forecast to accelerate to an average of 3.1 per cent per annum over the next five years,” says Little.
Petone where vacancy was almost unchanged over the past year.
The research data revealed that Miramar and Rongotai zone was the only precinct surveyed which recorded an increase in vacancy in the 2014 survey - with the figure rising from 8.8 per cent in 2013 to 10.52 per cent in 2014. Much of the empty space is within buildings on Tirangi Road and Kingsford Smith Street. “Some of these buildings are now functionally redundant and unlikely to attract long term tenants in their current condition. The most likely outcome is that the sites they occupy will be redeveloped.”
Overall vacancy within Petone was almost unchanged over the course of the year - easing to 6.9 per cent from 7.1 per cent in 2013. A vast majority of the vacancy is located within the precinct’s fringe locations such as to the west of Hutt Road and on Waione Road.
Within the core area of the precinct roughly bounded by Nevis St, Hutt Rd, Udy St, Nelson St and The Esplanade, the market is particularly tight.
At the western end of town a change to the character of occupiers is likely following the implementation of Plan Change 29 which has the intended proposed change of allowing a greater range of activities in this part of Petone. “The most likely outcome that a bulk retail hub will form,” says Little.
Within Seaview, the region’s largest industrial precinct, landlords have been successful over the last two years at back filling more of their space - albeit at relatively low rental rates. Higher quality space is now in short supply and particularly for warehouses up to 1000 sq m
Ngauranga, one of the smaller industrial precincts, has been volatile with a small number of buildings falling vacant or being leased having a significant impact.
Overall vacancy has trended down and is now sitting at 5.8 per cent, although the very late inclusion of data for the ex-Mastertrade building and ex-Pronto Print buildings means these latest lettings would reduce the precinct’s vacancy to an estimated 4 percent.
The Grenada precinct now boasts the lowest vacancy rate in the Wellington region among the major industrial precincts. An active letting market and strong competition from owner occupiers has seen the vacancy rate falling from 6.6 per cent in the 2013 survey, to 4.5 per cent in 2014.
In Tawa there is very little vacancy on the main road or in the Tawa Business Park. Tawa Junction, a 10,000 sq m building, has been mostly vacant for a number of years but is now around 60 per cent leased.
Within Porirua, in the upper parts of Elsdon, there is still plenty of bare land available with demand soft in the area with little inquiry. Further down in the Elsdon precinct there is good demand from owner occupiers for buildings in the 500-1000 sq m range but there is very little stock available.
Northpoint, the northern most precinct of the Porirua area, continues to suffer soft demand from potential tenants and remains predominately owner occupier territory.
On the Kapiti Coast, there is a higher degree of vacancy in units of between 300 sq m and 500 sq m The lack of stock, particularly at the smaller end of the size range, suggests there are development opportunities in the area.
Little says the commencement of work on the Kapiti Expressway has begun to have an impact upon commercial occupiers considering where they wish to locate.
Andrew Little of Bayleys.