Q4 2018 Update & 2019 Projections - Airport/Manukau/Wiri
We hope this finds you suntanned, well rested and ready to implement no doubt some ambitious new year resolutions.

Throughout 2018 we saw continued strong Buyer & Tenant demand across the industrial sector. We believe the shortage of industrial stock will continue to drive this trend in 2019. Vacancy rates quoted by various researchers in 2018 ranged between 1.2-2.4%, leaving Tenants and Buyers falling under the “beggars can’t be choosers” umbrella often forced to transact on spaces inadequate for their needs or engaging in bidding wars to secure the right property. Sites with gantry cranes remain as rare as hens teeth but as desirable as a Cheeseburger late on a Friday night and the importance of ‘drive through’ or ‘drive around’ sites adding real but hard-to-measure value to a property.

Oversubscribed demand has caused land rates per sqm in excess of $600.

The Mexican Standoff: Buyers Vs Vendors vs Bureaucracy:
Industrial Sales transaction volume numbers have eased as the pool of properties in the market diminishes. With Vendors instead electing to sit on their assets in fear of their “what can I do with my money?” question not being answered. Legislative changes and tightening credit lines from lending institutions are shrinking the buyer pool, yet property values are remaining intact.

Don’t Despair! There are still viable purchasing opportunities coming to market particularly for those buyers willing and able to move quickly. The major value-add opportunities we have seen relate to under-rented properties being brought up to market rates, which in some cases has seen an increase of up to 50% in the net rental.

Outlook for 2019:
Media propaganda continues to fuel a real mixed sentiment amongst the market. Whilst some commentators are forecasting another 12 months of similar market conditions, others in the market are sensing rain clouds on the horizon and operating with a sense of caution in anticipation of the market cooling off in a similar way to what we have seen for our comrades in the residential sector (albeit residential values are plateauing rather than declining). This pessimistic sentiment has been around for quite some time and I guess if people holding this train of thought and persist for long enough, they will one day be right. From being at the coal face on a daily basis, we forecast the following...
Rental Rates = High
Spec Builds = High
Cap Rates = Stay the same

The market will still remain favourable to landlords given the overall lack of supply in the market and the slow rate in which new industrial properties are being constructed. This will likely mean further increases in rental rates for those landlords with upcoming rent reviews of vacancies and likely drive more speculative builds. On the selling front, whilst there is still enough quality purchasers in the market to create competition, we don’t anticipate cap rates compressing any further meaning owners looking to sell will depend on rental rates p/sqm to increase their property’s value if they have a rent review in the immediate future.

Over the course of 2018 we completed 52 deals and transacted over 100,000sqm of Industrial and Commercial property. We would like to thank you all for your continued business and support and we look forward to further opportunities in the coming year.
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