Auckland industrial property yields remain below 8% despite the slowing of the economy and the increased cost of borrowing, Bayleys Research says in its latest report.
The median yield in Auckland was 7.9% in the December quarter, according to the Bayleys Research industrial yield index. This was the first time the median yield had sat below 8% for 2 successive quarters and provisional figures for the March quarter indicate that the sub-8% level is likely to be maintained.
As the graph shows, a negative yield gap has existed since December 2004, when the cost of borrowing, represented in the graph as the 90-day bill rate plus 2%, exceeded the median yield. The December result shows the negative yield gap to be at its widest point since late 1996, at 1.6 percentage points.
“While under these circumstances one would expect yields to soften, competition for the limited amount of investment property which has been brought to market has actually seen yields continue to trend down. Anecdotal evidence from industrial agents suggests there is a continued imbalance between purchaser inquiry and industrial property being brought to market, especially for prime industrial property.
“Competition between investors, property funds, developers & companies looking to purchase property for their own occupation remains strong, resulting in a continuing escalation of values.”
Attribution: Bayleys Research report, story written by Bob Dey for this website.