Seaview/Gracefield... the heart of Wellington’s industrial sector.
Regional vacancy edges down Wellington industrial vacancy rates are Wellington Industrial Vacancy Rate - All Precincts retreating from their 2012 peak, despite 8.00% the total inventory increasing. While the 7.00% Wellington economy has remained subdued over the last year, the overall vacancy rate 6.00%
within key industrial precincts has fallen, 5.00% albeit by a relatively modest amount. 4.00% Bayleys Research’s latest Wellington
Industrial Survey shows the total vacancy Vacancy Rate 3.00%
0.00% 2012 total of 7.5%. This broke a run of 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 six annual increases which more than July Source: Bayleys Research doubled the rate from a low of under 3% in 2006. The decline was the result of substantial falls within the Grenada Wellington Industrial Vacancy Rates By Precinct (July 2010 to July 2013 and Miramar/Rongotai precincts – which 14% previously had double digit vacancy rates 2010 2011 2012 2013 12% – offsetting small increases elsewhere. 10% While it experienced the most 8% significant increase in vacancy following the departure of a number of occupiers, 6% the biggest of which was Hot Chilly, Vacancy Rate 4% Ngauranga still has the region’s equal 2%
0% lowest vacancy rate, at 6.6%. Grenada Miramar & Ngauranga Petone Seaview Total Rongotai The precinct has now experienced Source: Bayleys Research vacancy rises in two consecutive surveys since bucking the overall trend in 2011 Ngauranga Investment Trends when it was the only one to register a Yield Forecast Demand Availability Land Value $/m2 decline in vacancy. While its vacancy rate 7.25% - 9.25% Sufficient Scarce 350 - 500 does tend to be fairly volatile due to its Leasing Trends relatively small scale, Ngauranga has lost W/House ($/m2) Office/Show ($/m2) Rental Trend Demand Supply a number of notable tenants over recent 80 -150 140 - 200 Steady Sufficient years. The specialised nature of many of the buildings, which feature high office Grenada Investment Trends components, has resulted in them being Yield Forecast Demand Availability Land Value $/m2 hard to re-let. 7.5% - 10.5% Sufficient Scarce 180 - 250 TURNAROUND TIME The latest increase would have been more pronounced had approximately Leasing Trends FOR WELLINGTON INDUSTRIAL 1,500m2 of space vacated by Interserve W/House ($/m2) Office/Show ($/m2) Rental Trend Demand Supply not been leased to Lewis’s Home Fabrics. 80 -150 90 - 160 È Soft Surplus That company has relocated from its Source: Bayleys Research It’s been a long time coming but a recovery is now evident in the Wellington industrial original Tawa base where the land is property market, with a combination of factors pointing to a more positive outlook for required for the Transmission Gully project. The precinct’s total inventory has The region’s two largest industrial the region. Ian Little, Bayleys Research senior analyst, reports. The precinct, however, enjoys a grown over the past two years as a result precincts, Petone and Seaview/Gracefield number of key benefits such as excellent of new development, the most significant in Lower Hutt, experienced little change in access to the regional motorway network, being purpose-built premises for Coca overall vacancy. Seaview’s rate increased pick up in leasing activity and with the overall vacancy rate in these developers while work has finally a high profile, centrally positioned location, Cola, New Zealand Micrographic marginally, however, most of its vacancy A continuing demand for vacant precincts decreasing this year for the commenced on the long awaited and a modern high quality supply of Services Ltd (NZMS) and Initial Rentokil is concentrated within the precinct’s older premises from owner occupiers has first time since 2006. This has occurred Northern Corridor, a new highway buildings that will continue to attract both in Jamaica Drive. and poorer quality buildings. Agency resulted in an increase in the amount of despite an increase in the overall supply between Levin and Wellington which tenant and investment interest. The precinct has also seen a lift reports suggest that there is strong space being absorbed by businesses in of floor space resulting from increased will significantly assist businesses with Heading up State Highway One, in leasing activity over the past 12 demand for smaller premises within the Wellington’s leading industrial suburbs development of new premises and the speed to market. Part of this highway halfway between Ngauranga and Porirua, months, attracting new occupiers 200m2 to 1,500m2 range, which are in over the past three years. refurbishment of older premises. will link with an expanded regional Grenada experienced the most significant such as Hot Chilly which has expanded short supply within Seaview. This has put a brake on the sharp Hutt City Council is helping to airport at Paraparaumu with associated decline in vacancy, falling to 6.6% from into new premises of approximately A number of owners of older, large increase in vacancy levels that occurred stimulate activity in the region through plans for a major business hub for the 9.9% in 2012, and putting it on level 2,500m2, vacating just under 1,000m2 scale premises are adopting a holding following the Global Financial Crisis, a proactive incentive package for Kapiti Coast. pegging with Ngauranga. in Ngauranga. position accepting lower rental rates
14 TOTAL PROPERTY TOTAL PROPERTY 15 in order to attract and retain tenants. Big Save Furniture has purchased Seaview Investment Trends The selected parties now move to the final existing bottle necks and more hazardous Recent leases of dated, low stud premises previously occupied by Feltex tendering stages of the process and it is stretches of State Highway 1. Yield Forecast Demand Availability Land Value $/m2 buildings have been concluded at rentals Carpets at Waiu Street in Wainuiomata. anticipated that the PPP contract will be 8.5% - 11.0% Sufficient Scarce 150 - 350 Kapiti Coast Airport as low as $30-$40 per m2. The company acquired the site and awarded in mid 2014. The improvement in the highway network Petone’s vacancy rate remains Leasing Trends 10,000m2 factory for $1,000,000 with a The two consortia are made up of will be particularly beneficial to business largely unchanged from the 2012 total, 2 2 view to relocating its national distribution W/House ($/m ) Office/Show ($/m ) Rental Trend Demand Supply New Zealand-based and international precincts north of the city such as Porirua, reflecting the on-going popularity of the centre from Porirua because the property 50 - 110 90 - 140 Steady Sufficient organisations. Each has a construction Upper Hutt and the Kapiti Coast. In the generally smaller workshops which make offers more space for future expansion firm working in partnership with road case of the latter, business activity will up a majority of the precinct’s inventory. which Big Save believes will be necessary Petone Investment Trends designers, investors and companies able be further bolstered by confirmation that No other precinct within the region offers 2 in the next few years. Yield Forecast Demand Availability Land Value $/m to maintain and operate the road. The direct daily flights to Christchurch from small engineering and manufacturing Masterpet is to occupy newly 7.5% - 9.0% Strong Scarce 500 - 700 Wellington Gateway Partnership’s lead Kapiti Airport at Paraparaumu are to companies the range of accommodation developed premises on a 1.9 hectare organisation is Leighton Contractors begin in November adding to the existing options that Petone does. Leasing Trends site at 143-149 Hutt Park Road, Lower Pty Ltd, while John Laing Investments Auckland service. There are fewer larger properties W/House ($/m2) Office/Show ($/m2) Rental Trend Demand Supply Hutt formerly occupied by Exide. The Ltd has taken the lead role for the other The airport’s mixed use business available resulting in some migration of 80 -120 100 - 140 Soft Sufficient property was purchased for $3,800,000 consortium, Positive Connection. park – known as Kapiti Landing – has tenants from the area when they are by Auckland based developer Kea Transmission Gully is a 27 kilometre been the primary focus of commercial looking to expand. A recent example of Eastern Suburbs Investment Trends Developments which has previously section of the Wellington Northern development in the area over recent years. this is Label and Litho which has moved Yield Forecast Demand Availability Land Value $/m2 worked in conjunction with Masterpet Corridor Road. It will be an important Approximately 70 hectares of the 127 to Gracefield in search of larger space on other projects. Kea will demolish the 8..0% - 9.0% Ç Strong Scarce 500 - 900 connector for freight travelling between hectare Paraparaumu airport site has been having traded from Petone for more than existing buildings on the site and develop Leasing Trends Wellington’s ports and the lower and designated for a range of light industrial, 30 years. This move has been replicated a purpose-built 9,455m2 distribution 2 2 central North Island, bypassing many commercial and retail activities. by Crown Forklifts which has decided to W/House ($/m ) Office/Show ($/m ) Rental Trend Demand Supply centre for Masterpet. move on from its Gear Street base, which 80 -150 100 - 200 Steady Scarce Infrastructure Upgrades it has occupied since 1995, to larger, more Source: Bayleys Research N Longer term, the 100 kilometre Wellington To Palmerston North modern premises in Gracefield Road. Lake Horowhenua Northern Corridor from Levin to Levin While vacancy has increased slightly, Wellington Northern Corridor Total Occupied Floor space - All Precincts Wellington Airport is one of seven roads the total floor space occupied within 1,240,000 (Wellington Airport to Levin) of national significance which will help Roads of National Significance Ōtaki to Levin section Petone has actually risen as premises have 1,220,000 ) 2 drive future business development in been reintroduced to the survey following LEGEND 1,200,000 the completion of refurbishment projects. the Wellington region. As a result of the Airport to Mt Victoria Tunnel section Tunnel to Tunnel section 1,180,000 decision to debt fund the Transmission Within the Eastern suburbs of Terrace Tunnel improvements Gully section of the corridor by way of a 1,160,000 Aotea Quay to Ngauranga section Ōtaki Miramar and Rongotai, near Wellington O–taki River Private Public Partnership (PPP), funding Linden to MacKays section (Transmission Gully) airport, vacancy fell, primarily as a result Peka Peka to Ōtaki section 1,140,000 MacKays to Peka Peka section of $1 billion earmarked for the section can Te Horo of the clearance of formerly vacant Peka Peka to Ōtaki section Total Floor space Occupied (m 1,120,000 premises at 113 Tirangi Road. This land now be used to bring forward other state Ōtaki to Levin section Existing State Highway 1,100,000 highway projects over the next five years. Ka-piti Island owned by Wellington International Airport 2008 2009 2010 2011 2012 2013 Peka Peka July Limited adjoins the company’s retail park. This includes two other sections of Source: Bayleys Research Waikanae River the Northern Corridor (MacKays to Peka Waikanae It is considered unlikely that it will be Otaihanga redeveloped for industrial use, continuing Peka and Peka Peka to Otaki), which MacKays to Peka Peka section economic development and job creation In addition, the council’s Paraparaumu the trend of declining industrial influence means 60 kilometres of new highway which encompass: development department has attempted Raumati South will be available by 2020. The Northern within the precinct. • A waiving of building and resource to simplify and streamline the consent Corridor will deliver economic and safety TASMAN SEA The reduction in the region’s overall MacKays consent fees and development process to reduce delays. It is Paekakariki benefits and significantly improve travel vacancy has been achieved despite the contributions on all qualifying development encouraging developers to meet with times between Wellington and the lower total inventory within the area surveyed by applications lodged prior to 30th June it prior to submitting resource consent North Island and assist businesses with Pukerua Bay Bayleys Research increasing slightly. The 2014. This applies to the construction of applications to ensure that they are fully distribution centres in the Wellington Linden to MacKays section (Transmission Gully) increase is a result of new development a new commercial or industrial building of aware of what information the council region with speed to market. Plimmerton and reinstatement of premises which were at least 500m2, including the development will require to process the application. Mana removed last year while they were under Pauatahanui of a new building following demolition It is hoped that these meetings will Transmission Gully Paremata Featherston Rimutaka Hill refurbishment. The total occupied space Waitangirua Upper Hutt or removal of existing buildings. It also avoid the consent process being The last year has seen significant progress Porirua Cannons To Masterton now stands at its highest figure since 2010 includes an extension to an existing slowed due to the council having towards work starting on the long awaited Creek 2 Linden and has increased by just under 53,000m building by at least 500m2. to request missing information or Transmission Gully project. In November Grenada since reaching a cyclical low in 2010. North • A waiving of rates for three years where documentation. last year, Cabinet gave the New Zealand Lake Wairarapa Hutt City Council incentivises a project is of strategic importance for The council’s proactive approach Transport Agency (NZTA) approval to Lower Hutt Petone new development the city’s future economic development. has paid early dividends with Big finance and build the Transmission Gully
Kaiwharawhara In a move which is helping to stimulate It must involve investment of at least Save Furniture and Masterpet having highway using a PPP. The NZTA was Aotea Quay to Ngauranga section industrial development activity in $2,500,000 and create at least 50 jobs committed to large scale projects in the also given approval to borrow up to the Terrace Tunnel improvements
WELLINGTON Eastbourne Lower Hutt, Hutt City Council, which – or, in the case of an existing business, city. In both cases the companies are estimated costs of traditional procurement Hataitai Airport to Mt Victoria Tunnel to Tunnel section Tunnel section encompasses the Lower Hutt and increase the number of jobs by at least to occupy properties previously utilised as part of the PPP. Kilbirnie – Basin Bridge – Buckle Street underpass Wainuiomata areas, has developed a 50% – and not be in competition with by substantial employers that have shut In April, NZTA announced a shortlist – Inner City bypass improvements package of incentives to encourage other businesses. down operations on the sites. of two consortia to deliver the project.
16 TOTAL PROPERTY TOTAL PROPERTY 17 Much of the development to date has Upper Hutt Investment trends further advanced. Earth works have just revolved around improving the airport commenced on the McKays to Peka Peka Yield Forecast Demand Availability Land Value $/m2 New Zealand Industrial Returns terminal and infrastructure and building section of the Northern Corridor which will 20.0 8.5% - 15.0% Soft Surplus 60 - 150 new bulk retail premises. Stage two of the pass by the entrance to the airport. Income Return Capital Return Total Return Leasing Trends development is now well advanced with 15.0 Industrial property investment W/House ($/m2) Office/Show ($/m2) Rental Trend Demand Supply New World, having taken occupation of a performance improves 10.0 new supermarket on site and Mitre 40 - 70 50 - 90 Soft Surplus Latest data released by the International 10 Mega committing to an 18-year lease Property Databank (IPD) and the 5.0
on another new building. Kitchen Things Returns (%) Porirua Investment Trends Property Council of NZ shows returns and Smiths City are to begin trading there 0.0 Yield Forecast Demand Availability Land Value $/m2 from industrial investment property in November. 8.5% - 11.0% Sufficient Sufficient 75 - 220 have continued their post recession -5.0 Todd Property became the major improvement over the last 12 months. Leasing Trends shareholder in the airport and business Total industrial returns, the -10.0 W/House ($/m2) Office/Show ($/m2) Rental Trend Demand Supply park last year, and in May announced a Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Dec-12 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Sep-12 combination of returns from income plus Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 50 - 120 120 - 200 Steady Sufficient $1 billion, 10-year master plan to create Year Ending changes in capital values, reached 11.5% up to 8,000 jobs at Kapiti Landing. The Source: IPD, Property Council NZ in the year to June 2013, up from 9.9% Kapiti Investment trends company has advised that negotiations a year earlier. The improved performance Yield Forecast Demand Availability Land Value $/m2 for leasing of business and further retail has been driven by capital value growth space are well advanced. It is envisaged 8.5% - 9.5% Strong Scarce 200 - 350 which has increased from 1.3% in the year that the site will be of interest to logistics to June 2012 to 3.3% in the 12 months Leasing Trends and freight companies, given its proximity 2 2 ending June 2013. W/House ($/m ) Office/Show ($/m ) Rental Trend Demand Supply to airport operations, particularly once Capital appreciation is now at its 80 -120 140 - 220 Soft Sufficient the improvements to the local and highest level since the opening quarter Source: Bayleys Research regional state highway network are of 2008 when values rose by 4.0% over the previous year. Capital values then fell for nine successive quarters between September 2008 and September 2010 reflecting the adverse impact of the Global Financial Crisis and New Zealand’s recession. Modern, well leased and well
located Wellington industrial premises 14 Tyers Road... one of two substantial Ngauranga sales over the past two years at yields in the sub $1,000,000 price bracket are of under eight percent. Below, Seaview property which sold for $4,183,000. commanding yields of below 8%. As the purchase price rises, however, yields tend to soften as illustrated by the recent sale of a modern high stud warehouse and air conditioned office premises on a site in Meachen Street, Seaview. The 3,314m2 premises sold for $4,183,000, at a 9.1% yield, with an eight-year lease back to a national transport business Strait Freight, a privately owned company which had previously been an owner occupier in the premises. However, two other larger sales by Bayleys Wellington in the Ngauranga Gorge at yields of under 8% reflect increasing investor demand for higher At 14 Tyers Road, a 2,732m2 industrial for future development while benefitting value properties with strong tenant building on 8,642m2 sold for $4,480,000 from a holding income in the short term. convenants. Both premises have large at a 7.9% yield. The former Fisher & The sale of 138 Hutt Park Road in Lower multinational tenants on long-term leases. Paykel premises is leased to ACM NZ Ltd Hutt illustrates this approach. The property A 2,916m² building at 33 Jarden for 12 years from April 2010. which is returning a rental of $279,000pa Mile on a 5,575m2 site with high profile Secondary grade investment has 5,450m2 of old, low-stud workshops exposure to the Hutt motorway sold for premises, particularly those featuring but on a high profile site of 9,230m2 $5,208,333 at a 7.2% yield. B.J. Ball older buildings, have been much harder within Gracefield. The purchase price of Limited, in occupation since the building’s to sell. There is evidence, however, of $1,600,000 largely reflects land value, completion in 1990, has entered into a add value purchasers looking to secure with the purchaser securing long-term Ready for take off... Kapiti Coast’s revamped airport at Paraparaumu will also became a major business hub for the region. new 10-year lease from March 2014. land holdings in order to position them development options.
18 TOTAL PROPERTY TOTAL PROPERTY 19