Fewer sweeteners in industrial deals: Bayleys

Its latest research shows that industrial vacancies appear to have peaked and are dropping off around Auckland. The industrial vacancy rate is now an average of 5.95%, compared to a retail vacancy rate in Downtown Auckland of more than 18%.

Albany Basin industrial space, in particular, dropped from a vacancy rate of 8.25% in 2011 to 6% in 2012.

Penrose reported the lowest vacancy rate, at 3%, which Bayleys suggested was because its buildings were smaller units so individual vacancies had less of an impact. Mt Wellington, with its large-format buildings, reported a 7.5% vacancy rate.

Bayleys said this turnaround in vacancy rates would eventually put pressure on construction and rents.

But it said the first change, already seen, was a reduction in incentives used by landlords to attract and hold on to tenants.  The typical rent-free period offered has fallen from eight weeks per year of lease to four.

To December 2011, industrial property had a higher return than office or retail rental properties: 9% compared to 6.5% for office space and 5.4% for retail.

Bayleys said speculative industrial development was hard to get funding for but development would be led by design build schemes such as Black and Decker’s $5.8 million facility in East Tamaki.