There’s more choice for industrial occupiers in most New Zealand markets and with that comes opportunity.

With New Zealand’s annual rate of inflation now sitting just outside the upper point of the Reserve Bank’s target band, banks have started moving on interest rates cuts and there’s cautious optimism that consumer and business confidence could rally off the back of this. Scott Campbell, Bayleys national director, industrial and logistics, says the drop in consumer spend is one of the main contributors to the amount of industrial stock available for lease in the wider Auckland region.

“Occupiers have been rationalising their real estate commitments and consolidating space footprints for operational and budgetary efficiencies,” he says.

“There is more property available in the leasing market and a marked increase in the amount of sublease space, which is something we haven’t seen much of in recent years as pandemic-related drivers propped up demand for warehousing.

“With supply chains settling down and consumer spending muted, some normality is returning to the industrial sector. Occupiers wanting to relocate, or right-size have plenty of choice in today’s market, and sublease space is plugging a gap caused by a slowdown in speculative new development.”

Businesses requiring cold storage or food-grade premises are the outlier here, with those market segments in high demand from occupiers.

“These sorts of facilities are costly to build so we could expect to see some retro-fitting occur to optimise existing industrial property and make it fit-for-purpose for these more specialised operators.”

Fraser Press, Bayleys Wellington commercial and industrial director says rents have plateaued, leasing enquiry is fairly soft, and deals are taking longer to stitch together in the Wellington region.

“Occupier decision-making is slow as they weigh up the options, practicalities and efficiencies are to be gained from relocating over remaining in their current premises with some fear of committing to a move in the current economic climate.

“We’re getting big leases done, but negotiations are proving tougher, and the process is more drawn out.”

Press says businesses are not tending to be in growth mode, so the leasing team is seeing more occupiers downsizing and amalgamating their property footprint.

“We currently have half a dozen buildings offering more than 1,000sqm of lettable space available – 12 months ago, we certainly couldn’t have said that.

“There is still reasonable activity in the under $100k rent roll market with the roughly 700sqm segment of the market still performing well.”

With overall leasing demand softening, Press says landlords are starting to show more motivation to fill buildings. More incentives are being offered, including some movement on rents.

“Bayleys can offer its occupier clients choice right now – across quality, location and price bands. It’s a great time to look around and consider potential options as 18 months ago, vacancy levels were sub-1% meaning there was very little for occupiers to pick and choose from.

“There is now an oversupply of vacant micro-units, and well-capitalised tenants are increasingly opting to become owner-occupiers given the advantages being their own landlord can bring.”

There is very little new development underway in the Wellington region given costs of construction and the economic landscape, with one exception being a waste management/refuse recovery facility off State Highway 2, opposite Manor Park.

In Christchurch, Bayleys Canterbury associate director, industrial and commercial, Sam Stone says rents appear to have stabilised, and the team is still fielding good inquiry from a range of tenants from start-up businesses to large-format transport and distribution tenants.

“We have a limited supply of existing quality industrial stock available and while vacancy rates have marginally increased, with greater options available in the large-format industrial sector, overall industrial vacancy rates remain at a historic low.

“There’s not a lot of new development in the forward pipeline, and those occupiers wanting purpose-built property would need to allow 15–18 months for a property to be delivered, which requires a lot of forward thinking and planning.

“With the increased cost of land and construction, occupiers are looking for building efficiencies, plus the infrastructure to accommodate things like electric vehicle charging and separate delineated entrances to various parts of the building for health and safety compliance.”