Record industrial year but scarcity looms

Mt Wellington industrial scene: 'Vacant industrial buildings and land for sale are all in incredibly short supply.

Colliers International's Auckland industrial team based at Highbrook has recorded its sixth record year in a row completing industrial property transactions to the value of $700 million last year - a 40 per cent increase on 2013.

The Colliers industrial division leased nearly a quarter of a million square meters during 2014 and completed 202 deals - including the largest industrial sale of the year: Goodman's Enterprise Park in Dalgety Drive, Wiri, for $53.23 million.

The division, led by Greg Goldfinch, national director for industrial, also sold an office and warehouse complex at 100 Carbine Road, Mt Wellington for $22.7 million and transacted a Crooks Road, East Tamaki deal which set a record market yield of 5.9 per cent for buildings worth between $5 to $10 million.

Chris Dibble, Colliers' national research manager, says yields are being forced to new levels recently because industrial property buyers are re-rating their risk margins due to higher levels of confidence.

"They are also being encouraged by unprecedented low industrial vacancy rates, particularly in Auckland, which are a major positive for investor cash flows."
Dibble says the latest Colliers investor confidence survey reflects this, reaching new highs in December 2014.

Seventy four per cent of respondents were optimistic about Auckland's industrial market over the next 12 months - up from 43 per cent two years ago.

Goldfinch says his team is very well placed for another record performance this year, but he says the biggest challenge the sector faces is availability of stock.

"Vacant industrial buildings and land for sale, or tenanted investment grade offerings, are all in incredibly short supply. Additionally, a tidal wave of capital is looking to be placed into the market, both domestically and from offshore.

"Combined with the possibility of a sustained period of low interest rates, pressure is being put on industrial values to the extent that the industrial sector is starting to mirror the residential market in terms of supply and demand."

Goldfinch says strong market fundamentals contributed to his team's success last year but that wasn't the only factor "We've had a core group of brokers together now for more than a decade. No one has left our team for the last seven years.

"We have also recruited very well, introducing younger, energetic members into a vastly experienced environment and that has provided us with an excellent team platform to extract the best results from a booming market in recent years."

"The economy's growth rate, the Auckland industrial property markets continued expansion as well as the attention we pay to succession planning within our team will hopefully hold us in very good stead for another solid year this year," Goldfinch says.

He claims his team is "the largest specialist industrial team in the country" and says it also has the benefit of working closely with a five member North Shore Colliers' industrial team that also just recorded its best annual result.

Goldfinch's group last year won the Royal Institution of Chartered Surveyors' (RICS) award for New Zealand's top industrial team for the fifth year in a row, along with the Real Estate Institute of New Zealand's (REINZ) award for the top sales office in the small to medium category.