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New Zealand industrial market update 2024

See below a summary of the mega trends within New Zealand’s industrial market, plus an outlook on the next 12 months for the market.

Vacancies edging up

Persistently low levels of vacancies led to strong rental growth over recent years. Conditions appear to be changing in some regions with a recent rise in sublease opportunities providing greater choice for occupiers. These opportunities are often “off market” so may not be captured in the vacancy rates. Overall, the market remains relatively tight.

Tenants becoming owner occupiers

Some occupiers have been purchasing their properties to improve their security of tenure and mitigate rising rents. Trend is expected to continue given the tight supply of industrial property across most regions.

Land in short supply

Persistent shortages of industrial land have led to substantial growth in land prices over the past decade. Large scale owner-occupiers are increasingly having to extend their search perimeters out to the fringe of major cities or even into other regions to find suitable land.

Outlook for the next 12 months

Rents on the rise

Low vacancies and moderate enquiry for space mean rents are likely to continue to rise but at a more modest pace. The risk of a recession, alongside the rise in sublease opportunities, may lead to slower rates of growth compared to the past 24 months.

Yields stabilising at higher levels

Signals that inflation and long-term interest rates are peaking means yields are likely to stabilise after a period of softening. Lower numbers of sale transactions means there is less evidence available to showcase this trend. Sentiment amongst agents indicates the investment market remains relatively weak, despite having a significant correction since 2021.

Prices stabilising for industrial land

Softening yields and elevated construction costs have taken the pressure off prices for industrial land. Construction costs are also stabilising as supply chain issues are resolved and subcontractors become more readily available.

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