Almost all sectors are facing some degree of pressure at present. While commercial property is not immune to this, the outlook is balanced by the strong, long-term fundamentals of this asset class and its proven resilience across changing economic conditions. The industrial property continues to hold appeal for investors. It shows strong signals of holding its 15-year position as New Zealand’s strongest performing asset class.

Several factors inform Oyster Property Group’s view around this. These include continued growth in tenant demand, record low vacancy rates, scarcity of appropriately zoned land, the continued uplift in rental income and returns that are tracking above an already strong 15-year average.

TENANT DEMAND DRIVES LOW VACANCY

Demand for premium industrial properties is increasing due to growth surge in key sectors. The rise in online retail over the last few years, and global supply chain issues, have led to increased need for local logistics, storage, manufacturing and warehousing facilities. Vacancy rates for the Auckland region are at or near historic lows, particularly in A-grade, premium industrial properties. Colliers’ research shows overall vacancy remained steady at 1.8 per cent in August 2022, including
just 0.6 per cent prime vacancies.

Scarcity of land, building constraints There continues to be a shortage of suitably zoned land for development, particularly in established industrial areas. Colliers’ research concludes that building development is rising, but there is some way to go until it catches up with demand. In the year to August 2022, building consents were issued for the development of nearly 1.4 million square metres of new industrial premises across NZ, the highest figure for an August year this century. Activity is greatest in Auckland, where building consents for 489,610m2 of new industrial floor space have been issued in the 12 months to August 2022, well above the 10-year average of 341,000m2. This still doesn’t appear enough to lift vacancy rates. Building costs are rising rapidly. Together with a significant skills shortage in the
construction industry and supply chain constraints, this lengthens the pipeline of potential for sufficient supply, further heightening demand.

POSITIVE OUTLOOK

The industrial sector continues to retain its appeal due to its strong defensive qualities and sound occupier fundamentals, including continued low vacancy levels. Rents are increasing rapidly, and signs are emerging of above-average growth rates. Colliers forecasts average prime warehouse rents will increase between 3-4 per cent a year, noting this is likely to be higher for A-grade properties.

MSCI data shows the industrial sector generated a total annual return of 14 per cent over the year to June 2022, well ahead of an already strong 15-year average of 11.7 per cent.

INVEST TODAY

Oyster has shares in Oyster Industrial Limited, which are available for purchase. Parcels of shares are available for $59,500 each (50,000 shares). Investors may apply for one or more parcels of shares. To obtain the Product Disclosure Statement please register your interest at oystergroup.co.nz/oil. Oyster Industrial Limited is the issuer of the shares.