Auckland industrial land prices have risen by 150% in 4 years â€“ and by 210% at Wiri â€“ Jones Lang LaSalle national research manager Kim Bannon said in a market outlook presentation on Wednesday.
She said the market had performed well and, even with the provision of 570ha more industrial land from a zoning review, there would still be land shortage.
Total returns over the 4 years exceeded 10%/year, with 22% in 2005 & 15% this year. “The market is slowing, but it is still strong.”
Ms Bannon said growth had been strongest in traditionally underutilised areas, Wir & the airport (160%).
“During this time yield have compressed 250 basis points. During the same period rents only increased 25% – in real terms this is an 8.1% increase over 4 years. Although land prices & construction costs increased, developers did not require rental growth as yield compression provided the necessary increase in capital value.
“Currently, land & construction costs are making it difficult for new developments to be viable. With limited further yield compression expected, an increase in rental growth is required.
“Significant rental growth is not expected for 2-3 years, until the economy picks up from the current slowdown, and existing developments such as Highbrook & the Airport become full.”
Vacant business land amounted to 1170ha but could be boosted by 570ha from rezoning. “However, even including this additional supply, vacant sites are forecast to be fully absorbed by 2020.”
She said land prices between precincts had occurred: “Wiri, the Airport and, to a lesser extent, East Tamaki now trade at discounts in the range of 20-30% to more established locations such as Mt Wellington & Penrose. Historically they have traded in the range of 50-60%.”
Attribution: JLL presentation, story written by Bob Dey for this website.