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

Biggest trends

Vacancies edging up

Persistently low vacancy levels have led to strong rental growth in recent years. Conditions appear to be changing in some regions with a recent rise in spaces for lease providing greater choice for occupiers. Many of these opportunities are “off-market” and may not be reflected in vacancy rates. Overall, the market remains relatively tight compared to other asset classes.

Leasing headwinds

Rental budgets are tightening for tenants, making it harder to meet landlord expectations. Many occupiers are moving cautiously as economic conditions impact business confidence.

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 to the fringes 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 rising but at a more modest pace. The risk of a recession, alongside a modest rise in vacancies, may lead to slower rates of growth compared to recent years.

Investment market shifting into neutral

Sentiment among agents suggests that the investment market is heading into neutral territory after a period of weakness. Yields have risen since 2022 due to higher interest rates. While recent interest rate cuts should help bring yields down, long-term bond rates have remained persistently high due to lingering concerns about inflation. As a result, yields may not reduce significantly from recent levels.

Confidence up but sales volumes still light

Reductions in interest rates have boosted confidence across the market with a growing view that the worst has passed and a new cycle is emerging. Sales volumes remain relatively light due to persistent gaps in price expectations between buyers and sellers, but these are closing over time.