Fewer sweeteners in industrial deals: Bayleys
Commercial landlords are cutting down on the incentives they offer their industrial tenants, according to Bayleys.
Monday, October 1st 2012, 12:00AM
by The Landlord
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.
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