FIGURE 7
Market analysis
Industrial Yields Continue
to Contract
Sale prices are continuing to increase
at a faster rate than rents, causing
yields to contract. Prime industrial
yields have fallen to record lows with
Knight Frank seeing yield continuing to
fall with increasing numbers of sales
transacting at sub 6%. An example is a
building that Knight Frank has recently
sold at 66 Cryers Road, East Tamaki
which sold for $11,333,000 in May 2016
for 5.90% which illustrates the demand
for modern-high quality investments
and the contraction of yields.
The shortage of stock has seen owner
occupiers compete with investors
in order to secure premises which
is further driving up sale prices and
contracting yields. Over the past 12
months the average prime industrial
yield sat just under 6.40%. Yields for
prime industrial properties have fallen
by 25 - 50 basis points over the past 12
©
KFNZ Ltd 2016 - KFNZ Ltd t/a Knight Frank has published this report for general information only and the contents are not to be relied upon in any way. Although high standards have been used in
the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank for any loss or damage resultant
from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties
or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank to the form and content within which it appears.
KFNZ Ltd is a registered company in New Zealand No 4153578.
FIGURE 4
South Auckland – prime industrial $sqm rates
FIGURE 5
Average A-grade industrial yield – South Auckland
FIGURE 6
Industrial sales & investment yields
In Conclusion
The overall outlook on the New Zealand economy is positive
in many respects and prospects are looking good for this to
continue into 2017. Record low interest rates and a definitive
shortage in supply of quality stock and available land, will
continue to contract yields and place upwards pressure on
rentals. Demand for prime offerings will remain positive with
overflow benefits being realised by the secondary market.
We expect the market to remain in positive territory for the
short to medium-term, although indications are pointing
towards the market nearing its cyclical peak.
Market Predictions
·· Strong demand suggests the industrial
market will remain buoyant into 2017
·· Increasing pressure on B-Grade
industrial rents and yields from Prime
demand overflow
·· Yields will continue to contract
throughout 2016
·· Increased demand from owner occupiers
as low cost of funds make purchasing
more affordable than renting
·· As increased supply becomes available
in 2017 rental inflationary pressure
will slow
2013
2014
2015
2016
2017
(F)
$0
$50
$100
$150
$200
$250
$300
2014
2013
2012
2011
2010
2015
2016
2017
(F)
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
Address
Suburb
Sale
Price
Floor
Area
Yield
Sale
Date
Prime/
Secondary
Lorien Pl
East Tamaki
$1,100,000 600
Vacant
Jun-16 Secondary
Lorien Pl
Manukau
$2,500,000 1,390
6.00% Nov-15 Secondary
Hill St
Onehunga
$4,471,000 1,044 Undisclosed Jul-16 Secondary
Stonedon Dr
East Tamaki
$4,850,000 3,480
Vacant
Jul-15
Prime
Harbour Ridge Dr Wiri
$8,200,000 2,675
5.88% Aug-15
Prime
Neilson St
Onehunga $8,833,333 6,309
7.49% Jun-15
Prime
Echelon Pl
East Tamaki
$8,500,000 4,153
Vacant
May-16
Prime
Cryers Rd
East Tamaki
$11,333,000 6,000
5.9% May-16
Prime
Carbine Rd
Mt Wellington $11,638,000 5,527
6.00% Sep-15 Secondary
Jarvis Way
East Tamaki
$13,000,000 1,735
5.50% Oct-15
Prime
Church St
Penrose
$16,500,000 8,388
6.85% Feb-16 Secondary
Warehouse
Office
Market Yield
Land Value
Prime
Secondary
Prime
Secondary
Prime
Secondary
< 1 ha
> 1 ha
Penrose/Onehunga $115-$130
$85-$105
$200-$250
$175-1$95 5.50%-6.25% 6.75%-7.50% $550-$600 $450-$550
East Tamaki
$105-$120
$85-$100
$190-$240
$160-$185 5.75%-6.50% 7.00%-7.75% $500-$600 $400-$450
Mount Wellington
$115-$130
$85-$106
$200-$250
$175-$195 5.50%-6.25% 6.75%-7.50% $550-$600 $450-$550
Manukau/Wiri
$105-$120
$85-$95
$180-$220
$155-$175 5.75%-6.50% 7.00%-7.75% $400-$525 $350-$450
Airport
$105-$120
$85-1$00
$190-$220 $160-$185 5.75%-6.50% 7.25%-8.00% $400-$525 $400-$450
Avondale
$105-$120
$75-$95
$200-$225 $130-$170 6.00%-6.75% 6.75%-8.00% $500-$600 $400-$500
months with typical yields ranging from
5.50% - 6.50% for Prime offerings.
Low interest rates and the strength
of the growing economy continue to
motivate investors and syndicators
who are chasing a competitive yield.
The shortage of properties being
marketed for sale has driven a highly
competitive market place and firming
of yields. Knight Frank is forecasting
that this trend will remain consistent
through 2016 with further contraction
of yields and the average prime
industrial yield to fall below 6%.
Office
Warehouse
AUCKLAND
AUCKLAND
10
PROPERTY VIEW 2016
KNIGHTFRANK.CO.NZ11