The Auckland industrial market continues to be a standout performer against the wider property market. Following the GFC Industrial land values fell roughly 25% across the Auckland Region from their peak in late 2007. The Airport Oaks Precinct witnessed a similar story with prime land values pulling back from their peak of $400 per/m2 in 2007 to approximately $300 to $335 per/m2 today for prime business zoned land (Fig1).
For the past 24 months Airport Oaks land values have remained stable, with several robust prices achieved for land over the past year at Pavilion Drive and Airpark Drive. Recent retail sales for industrial subdivision lot’s within the immediate area have achieved rates between $290-$503 per/m2 (Fig.3).
As we begin to move out of the current recessionary cycle, we anticipate that through a combination of significant population growth rates and an anaemic supply of business zoned land, we will begin to see pressure placed back on industrial land values. As the preferred location for distribution and warehousing companies Mangere Gateway will not be immune from these pressures, with only a handful of vacant freehold lots in Airport Oaks left for development.
A good indicator to the health of the industrial sector is the BNZ Performance Manufacturing Index (Fig4). This monthly survey bundles the employment intentions, production, stocks, new orders & delivers of goods into a single indices, 50 basics points being a state of equilibrium. Since November 2008 the indices has clawed its way out of contraction, with the latest January survey suggesting the market has stabilized.
Unlike other property markets, industrial tends to be led by purpose built complexes and owner occupiers rather than speculative development, keeping a lid on oversupply and the associated impacts on vacancies, rental levels and ultimately value. The conservative nature of this market is evident in CBRE’s Q4 2010 Industrial Market Research with prime Airport Oaks rental rates, land values vacancies and yields holding steady for the past 2 years (Fig.5).
As a whole Airport Oaks has a significantly higher proportion of prime industrial stock than the rest of the Auckland region, insulating this suburb from the heavier discounting typically applied to secondary stock. With nearly 77% of all industrial stock classified as prime, Airport Oaks has more than double the Auckland Regional proportion of prime industrial stock, currently only 33% (Fig.6 & 7).
From an investment/development perspective Airport Oaks has achieved similar prime rental rates compared to the wider Auckland Region, with lower vacancy. However CBRE Research suggests prime land values are approximately $150 less per/m2 providing an attractive development margin compared to alternative sites closer to the city, under pressure to convert zoning to more intensive commercial/retail and residential uses (Fig.2)
