The industrial sector continues to be extremely buoyant. With strong tenant demand and an ongoing shortage of available existing buildings and developable land, it’s the place to be right now for investors.
Supply chain problems caused by the global pandemic are constraining the supply of goods and while high asset prices and relatively full employment are boosting people’s sense of wealth, the economy is relying on the government continuing to subsidise businesses to get through Covid. The inflation rate has climbed to 4.9% in the September quarter as building materials, fuel and energy, and transport costs continue to rise. This trend is likely to continue into 2022.
What is the effect on the industrial market on a day-to-day basis? Research shows that online orders for retailers have increased by over 30%, and as a result, freight, logistics and courier businesses are booming.
With Covid placing strain on our reliance on imported goods in New Zealand, we are seeing examples of tenants losing up to a third of their margins on extra shipping costs for containers. Warehouses are packed to the brim as product comes in sporadically and doesn’t go out fast enough. This is resulting in tenants requiring overflow space, pallets are in short supply, and some tenants are starting to pay later in the month.
The manufacturing industry is a beneficiary of the current situation, experiencing high demand and having to adapt to material shortages while many businesses are also benefiting from essential services work throughout the lockdowns.
With the effects of the pandemic continuing to boost demand for warehousing, resulting in shortages of industrial property ongoing across the Auckland market, we expect this sector’s time in the sun to continue for the foreseeable future.
For property information, please click here.