Industrial rents forecast to hold over next year
Christchurch's industrial sector is still growing more than three years after the September 4 earthquake hit.
This is keeping the pressure on industrial property in the city, according to a new report from commercial real estate firm Colliers, creating "high demand" for industrial space.
The report quotes Statistics New Zealand figures revealing the number of industrial-based businesses grew by 5.5 per cent from 1012 to 2013, and the number of staff by 6.2 per cent.
"Christchurch's industrial sector has recorded some of the highest business and employment growth rates of all the New Zealand regions," the Colliers report says.
The researchers say there is "virtually no prime space vacant in Christchurch". This is a combined result of ongoing demand for premises because of the rebuild, and relocated office tenants still occupying industrial buildings.
They also note that the lack of high-grade space is stimulating refurbishment of older premises. While the city lost industrial buildings as a result of earthquake damage, new development has replaced 20,000 square metres, the equivalent of 2 hectares.
Industrial areas least affected by the earthquakes, such as in the south and west of the city, continue to draw "high levels of inquiry" from businesses needing premises, the report says.
These include Hornby-Islington, Middleton-Sockburn and Riccarton-Addington. Sydenham's vacancy rate has dropped to 10 per cent in the past year as businesses return. As vacancy rates declined around the city in the face of strong demand for premises, rents rose by around 6 per cent in the year to September. Rents for prime warehouse space now average almost $100 a square metre, and rents for industrial office space $188 a square metre.
"However, the significant growth has subsequently moderated," the researchers say. "We forecast rents to hold at current levels over the next 12 months, helping tenants to adjust to the new, and much higher, rental environment."
The report says insurance costs are now better understood, but are likely to push gross rents upwards again at rent review time.
Demand for space means land development activity is strong, with some developers fast- tracking stages.
The researchers point to the 114ha Waterloo Business Park near Christchurch Airport where stage two has been brought forward after stage one filled quickly. At Glassworks Industry Park in Hornby, developer Goodman Property Trust is completing two developments, a 6871sqm warehouse and office complex leased to DHL for five years, and a 5276sqm complex leased to tyre company Bridgestone New Zealand for 12 years.
Investors have also been busy, the report says.
"Demand and rental growth has underpinned the significant investor confidence evident in Christchurch, coupled with the expectation that conditions will only get better."
However, it says confidence "faltered slightly" in the three months to September, which was most likely a correction after a period of strong results.
The Colliers report found the industrial-property sector was also strong in Auckland and Wellington, but "flat" outside of the main centres. Expansion in the provinces depends on growth in individual regions, it says.