Auckland Industrial Space under Pressure
Posted by Fleur Revell
Knight Frank’s Josh Franklin, says the property market will face increasing pressure as the revival of Auckland based businesses and new offshore entrants creates more demand particularly for bigger or multiple premises.
As New Zealand businesses bounce back post-recession, a commercial real estate agency Knight Frank warns the Auckland property sector will struggle to meet the resulting demand for industrial premises to lease.
Director of industrial sales and leasing for Knight Frank, Josh Franklin, says the property market will face increasing pressure as the revival of Auckland based businesses and new offshore entrants creates more demand particularly for bigger or multiple premises.
“The industrial property sector in Auckland has been extremely busy over the past 12 months as companies begin to recover from the global financial crisis. However, as the demand for premises increases, the supply of new properties for lease remains worryingly static, outside the design – build sector,” he says.
Franklin says the recent lease of a 6,500sqm building in Otahuhu, South Auckland; with a 3,000sqm storage yard, marks the uptake of one of the few remaining quality industrial properties in South Auckland available for immediate occupation.
“The premises have racking that is impressive and made the property extremely attractive, with such a high quality warehousing and distribution space being increasingly difficult to find,” he says.
The James Kirkpatrick Group, one of the largest commercial property businesses in Auckland, has leased the building to DIY Resolutions New Zealand Limited, which supplies Bunnings Warehouse NZ exclusively with storage products and paint accessories.
The James Kirkpatrick Group specialises in developing large format industrial premises on spec and finds this strategy works well, particularly for tenants that are new to the market or businesses that are consolidating or expanding and need space sooner than a traditional design-build process would deliver.
The biggest concern however, Franklin says, is the lack of central isthmus land suitable for industrial development and the value of improvements particularly on central ‘brownfield’ sites that is still too high to allow redevelopment. Higher land values may potentially be problematic for industrial tenants and could lead to an increase in occupation costs.
Franklin says the lease of Otahuhu premises will be one of the largest lease deals completed in the South Auckland marketplace this year.
“The long term lease of this property to an Australian company reflects a confidence in the local market which is encouraging from an economic standpoint,” he says.
The Group Operations Manager for DIY Resolutions, Ian Murfit, says the new premises are important to facilitate a better local service.
“Previously we had been operating in NZ through a third party storage company, so the lease of these premises was essential in order for us to have better control in the service we are providing on a local level,” he says.
“We are thrilled to have found such a high quality property and to be able to supply the local market with goods more quickly and easily.”