New roading drives Wellington's future industrial growth

Construction taking place on the Te Moana Road interchange in Waikanae which is part of Kapiti Expressway.

Over $2.6 billion worth of new roading infrastructure is set to reinvigorate some of the Wellington region's established industrial precincts and could provide the catalyst for the significant expansion of new precincts north of the city, says Bayleys Research in an overview of the region's industrial property market.

The Northern Corridor motorway, now under construction and incorporating 60 kilometres of new State Highway One (SH1) roading between central Wellington and Levin, should provide a much improved connection between the Capital and the lower North Island, says Ian Little, national manager of Bayleys Research. "The new roading will significantly enhance the potential of new northern business precincts particularly on the Kapiti Coast," Little says.

The new Kapiti Expressway, on which work commenced in 2013, will run by the entrance to Kapiti Coast Airport, at Paraparaumu. The adjoining 125ha Kapiti Landing business park, which Todd Property is developing, has resource consent for about 300,000sq m of commercial, retail and industrial space.

"To date, development has largely been focused on bulk retail premises servicing a growing surrounding residential catchment," says Little. "However, longer term, given its proximity to both Kapiti airport and the new motorway, Kapiti Landing has the potential to become a major regional commercial and industrial business hub.

"Improved connectivity to Wellington city and other major business precincts within the region means interest from storage and distribution companies in Kapiti Landing is likely to increase - particularly as a base for servicing customers in the lower North Island."

Upon completion of the Northern Corridor, peak hour travel times between Wellington airport and Levin are forecast to be reduced by as much 40 minutes, according to New Zealand Transport Agency. Its two largest components are the Kapiti Expressway and the Transmission Gully motorway on which earthworks have begun. It will link the southern end of the Kapiti Expressway to the Wellington/Porirua motorway.

"The much improved SH1 will be an important connector for freight travelling between Wellington's air and sea ports and the lower and central North Island, significantly improving travel times and assisting businesses with distribution centres in the region with speed to market," says Little. "It will almost certainly accelerate the trend which has been apparent for a number of years in Seaview of distribution centres replacing manufacturing companies."

Ian Little, Bayleys Research.

The Transmission Gully section of the Northern Corridor will also provide improved access from SH1 to Porirua and the Hutt Valley. There will be interchanges connecting the new route to SH58, which in turn links with the Hutt motorway (SH2), plus a connection to Porirua's CBD. A proposed four-lane link road between Petone and Grenada, subject to resource consent and estimated to cost $250-$270 million with a completion date of 2023, will also link SH1 and SH2.

These roading improvements are expected to shave around 15 minutes off the current travelling time between Kapiti and the Hutt Valley, and five to seven minutes between Porirua and the Hutt Valley.

"In particular, this will facilitate shorter and more efficient freight movements to and from Wellington's major industrial hub of Seaview/Gracefield and Petone and provide better connections with lower North Island customers, clearly of huge benefit to distribution companies based in the Hutt," says Little.

He says there are already agency reports of a lift in interest from distribution companies looking to secure sites in areas that will benefit from the new roading infrastructure.

"Auckland and Tauranga based third party logistics companies have carried out searches in Otaki and Levin resulting in one committing to property within Levin. They saw the advantage of having a property, located strategically to the north of Wellington, in an area offering cheaper rentals than many of the region's more established industrial precincts."

Little says there has also been a lift in industrial leasing activity over the last 12 months in Porirua and Tawa area, driving down vacancy rates. A number of infrastructure companies involved in the Transmission Gully project are reported to be searching for space within the area adding to pressure on an already tight market, with agency estimates putting vacancy rates as low as 5-6 per cent.

"Given these market dynamics, coupled with the availability of greenfield development land in locations such as Broken Hill, an increased appetite for development, some of it speculative, is evident."

Little says demand is particularly strong for storage and warehouse space of between 300sq m and 500sq m with extremely limited availability of such premises. While the development sector is responding to demand, the current pressure on supply is pushing up rentals within the area.