Market Comment Feb 2017

Very often when we stop to analyse the market and it’s direction we focus on the external factors – the state of the economy, what the banks are doing, what suburban accountants are saying and the projected Fonterra payout. A major aspect that very often we totally by-pass is how well individual businesses are doing. And currently that is one of the biggest drivers of the industrial real estate market. 

All around us, in the Auckland market at least, we are seeing businesses that are doing well. Doubtless we need to take into account whether the banks will lend, and the confidence business owners have in the future of the economy. But if a business is doing well and needs more space, that will ultimately drive decision making. And when you add together a lot of businesses doing well, and needing more space, that adds up to an active market. Which is what we currently have.

Enquiry levels are good – both for leasing and buying. Add to that the incentive many owners have to cash out their capital gains, and we have a combination of active buyers and active sellers. If there is any handbrake, it is that most, if not all, of the banks still seem to be in a relaxed holiday mode and taking far too many long  lunchtimes to get back to clients with answers.

The other very apparent trend is the steady escalation in rents. Over the past 18 months we have seen rents in some cases increase up to 50%. On the face of it this may seem massive, but when taking into account the relative lack of rental growth over the 10 preceding years, and increased building and land costs, is not surprising.
Unfortunately what the increase in rentals often does is cause a spike in spurious enquiry. Tenants who have rental reviews energetically running around the market looking for cheaper space – only to find it doesn’t exist.
 
February has continued the January mood, with a string of transactions which has resulted in a real backlog of refurbishment work for our crews. We have several of the upcoming opportunities here. Additionally, in fairness to sitting tenants, there are a number of other properties not listed on our website, which will be available as leases end. Call for details to match your specific enquiries.