Other asset classes’ risk profiles have weakened
The industrial sector, particularly in Auckland, is gaining momentum as investors compete for a limited inventory of assets – making it the most preferred asset class post-COVID-19, according to Bayleys South Auckland Industrial team.
The team has revealed that other asset classes’ risk profile has weakened due to market and economic uncertainty. By contrast, Auckland’s industrial sector is experiencing “feverish activity”, with fresh investors among those battling to secure industrial property on the back of diminishing returns from other asset classes and higher compliance thresholds in the residential investment market.
According to Bayleys, the industrial property market was full of activity in the first two months of 2021 – with the realtor closing deals on over $400 million of industrial property, nearly doubling the usual transaction value for the start of any year.
Scott Campbell, the national director of industrial at Bayleys, said the record yields for prime industrial property achieved in 2020 look set to continue this year, with around sub-3.75% figures in the near future.
“Sub-4% yields are now becoming common in the Auckland industrial market driven by the limited supply of industrial property, which is fuelling a feeding frenzy from investors when a strongly-tenanted, well-located offering hits the market,” Campbell said.
“I think we’ll see some further recycling of assets as landlords clear debt, and once New Zealand’s borders reopen and investors or their representatives are able to view bricks and mortar, I would expect to see an influx of off-shore money heading this way.”
Campbell expects new entrants in the industrial investment space, given the well-performing fundamentals of the sector.
“And there will be steady interest in emerging industrial precincts such as that in Drury, for example, where solid activity has seen bare land sites selling for up to $500/+ per sqm – something I never thought we’d see,” he continued.
The industrial investment and “land grab” story evident in the Auckland market is also seen around the country, with other Bayleys offices reporting unprecedented levels of activity.
