It's time to grab a true bargain in South Auckland, writes Colin Taylor
KEY POINTS:
A Wiri property that housed New Zealand Post's South Auckland mail centre has been put on the market and is expected to sell for below replacement cost.
The sale of the 3570sq m former mail centre at 84 Kerrs Rd, Wiri, follows the amalgamation of the South Auckland and Auckland mail centres by New Zealand Post, into a new $30 million one-level, 17,000sq m premises at Highbrook in East Tamaki.
New Zealand Post's Highbrook premises include new mail sorting and processing technology, which has been introduced in New Zealand Post's six metropolitan sites around the country. The company's move is part of a major programme of work in its mail processing business. Three new mail sorting centres in Auckland, Waikato and Christchurch have been built and three other centres have undergone major refits.
Nigel Ingham, Colliers central industrial manager, who is marketing the South Auckland mail centre, with its 5749sq m site, with colleague Simon Green, says the complex would cost $5 million to $6 million to build today. He said a buyer could potentially own it for well below this figure.
"A developer, investor or owner-occupier couldn't buy the land and erect the building for the price they could purchase it for."
The simplified feasibility did not take into account the holding and finance costs in obtaining consents for new premises and a possible building time of seven months, or any additional infrastructure, such as air-conditioning. "This would take the cost of a new building to more than $6 million."
Ingham said anybody purchasing New Zealand Post's existing freehold stand-alone site would be "getting exceptional buying". The South Auckland warehouse and office property was bought by New Zealand Post just before the 1987 sharemarket crash.
The spec-built property wasn't finished before New Zealand Post signed a purchase agreement and it was able to make changes to the office layout to suit its requirements.
Green says the good-quality warehouse is air-conditioned with heat detection systems and a suspended ceiling. If the ceiling is removed, a new buyer has an excellent warehouse.
He says there are few opportunities to buy a totally air-conditioned substantial warehouse in South Auckland that would suit temperature-controlled businesses, such as food and chemical storage or printing.
To set up similar infrastructure in an existing building would be very expensive.
The property has a number of additional features, including good street presence, ample parking, the ability to drive right around it, making it easy for truck manoeuvrability and traffic movement efficiency, and a business 6 zoning under the Manukau City Council's District Plan.
Green says land with this zoning is being swallowed up, as it has the fewest number of controls for business operation.
The zone is specifically for heavy industry and manufacturing to run 24 hours a day, seven days a week.
The council says business 6 zoned land is a scarce resource and of major importance because it is the primary location for potentially offensive or noxious activities.
It has restricted land with the zoning to these types of businesses and, as a result, there is a more limited range of activities.
The property is located in an already established area. Ingham says the address is well known to more than 500 businesses who visit 84 Kerrs Rd every day to pick up mail from the private boxes located on the property.
Many of the companies with private boxes are major corporates who have invested in Wiri and Manukau.
These areas have been attractive for investment by offshore and local buyers, says Ingham.
The council has launched the "Locate2Manukau" campaign to attract new offshore investment in manufacturing and international trade services sectors.
Mayor Len Brown says the council also works with existing investors to help them expand and develop their businesses.
In addition to having one of the fastest growing populations in New Zealand, Manukau also has one of the best performing economies, estimated to have grown in the past few years by 5.7 per cent, compared with 5.1 per cent in the Auckland region and 2.2 per cent for the national economy.
In the year ending March 2006, employment in Manukau grew 5.6 per cent.
Ingham says buying New Zealand Post's property makes sense for a large business because, during the past year, the industrial market in Wiri and Manukau has been constrained by a lack of high-quality, substantial properties for sale.
This is one of the few on the market. Demand for prime property is sharp and investors are still willing to pay good prices to secure quality premises. There has been a softening of yields because of rising interest rates and global liquidity problems, but prime industrial property is still a highly sought after asset.
Kerrs Rd is in an established industrial pocket with good transport linkages to Manukau's CBD, where most commercial activities can be found. The area also includes Auckland International Airport, Ports of Auckland's inland port at Wiri and SH1.
Major infrastructure work includes the soon to be completed SH1 to SH20 connection. The $210 million project involves construction of a new four-lane section of motorway to provide a connection between SH20 at Puhinui to SH1 at Manukau.
The new extension will improve access to and from Auckland International Airport and provide considerable relief to other Manukau arterial routes, as well as Auckland.
In another major piece of infrastructure, Ports of Auckland is seeking government funding for a rail siding at its inland port.
If the rail shuttle services goes ahead, it will eliminate the 25km cross-city road haul and provide environmental benefits, says Green. Any improvement to the inland port will reinforce Wiri and Manukau's claims to be rapidly improving industrial locations.
Ingham says New Zealand Post's property will appeal to investors and owner-occupiers.
The excellent location on Kerrs Rd will make the property particularly attractive to importers and exporters, as well as a large tranche of other businesses.
There is tight land supply, with industrial development land rapidly being exhausted.
Only about 10 years' supply is left in the Manukau/Wiri area.
At the same time, there are few large buildings available and industrial occupancy is strong in an area that has a ready supply of white and blue-collar workers.
Vacant premises that come on to the market are leased quickly.
