Not all industrial premises are hot property

LIZ MCDONALD
Last updated 12:37 22/05/2013

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Christchurch's industrial sector is growing rapidly.

But despite demand for premises from businesses gearing up to rebuild the city, not all are hot property.

A new report on the city's industrial market from commercial real estate firm Colliers International points to what tenants, and investors, are looking for.

The report says location is "paramount" to future demand for properties.

It lists the core southern and western industrial suburbs, such as Hornby/Islington, Middleton/Sockburn and Riccarton/Addington, as being better placed than those in the north and east.

"The parts of Christchurch's industrial sector unaffected by earthquake issues remain in a commanding spot," the researchers say.

Difficulties in less-popular areas include expensive or inaccessible insurance, as well as physical drawbacks such as low stud height.

Other factors pinpointed as making a property less desirable include buildings thought to be on less stable ground, less able to satisfy seismic aspects of the building code, or of a quality that fails to satisfy modern tenant demands.

Research from the Property Council this year has shown Christchurch's industrial property landlords have the highest confidence of any commercial property sector.

Real estate firm C B Richard Ellis has reported that industrial properties in the city are the best- performing in the country, with rents rising 8.1 per cent during 2012 and rental growth consolidating in recent months.

Despite demand driven by businesses shifting, expanding or arriving in the city for the rebuild, the overall vacancy rate for industrial property for the city rose from 4.6 per cent to 6.3 per cent in the past year, according to the Colliers data.

Sydenham fared badly with vacancy rising to 13.6 per cent.

The report says this uneven leasing illustrates "the desirability of only a certain sector of the market to businesses needing industrial properties".

Rents and values are both growing, but the researchers expect that growth to slow.

"Where a precinct is in demand, rents have increased dramatically. Prime combined industrial warehouse and office rents increased by 9.9 per cent over the 12 months to March 2013, with 2.5 per cent growth expected in the next 12 months.

"Given that market rents have increased so much and most tenants have now organised their accommodation requirements, lower, but still high, growth is forecast."

The report notes a shortage of good-quality investment property for sale in the popular bracket up to $5 million, where assets have sold well.

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The sale of land is also on the rise, and "the greater levels of confidence in rebuild activity could drive this further upwards".

The report estimates Canterbury has more than 500 hectares of industrially-zoned vacant land able to be developed.

- The Press

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