Industrial sector shows grit

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As the repercussions of the global pandemic continue to shake down in the New Zealand economy, it is becoming clearer that the industrial sector has largely been shielded from many of the body blows that other sectors have experienced – and continue to endure.

Now that the sting in Covid-19’s tail has caught up with us, it is hoped that the industrial sector continues to thrive. The wheels of activity in the industrial arena have kept turning, with certain sub-sectors outpacing others and barely missing a beat, while other innovative businesses have jumped quickly to meet new demands.

Supermarkets were the winners during the strictest lockdown times and as demand ramped up for home delivered groceries, so too did the supermarket operators’ search for dedicated “dark store” premises to handle the unprecedented online orders.

Exports resilient

Exports within the primary sector – notably dairy, meat and horticulture – have been resilient despite global economic volatility. According to a report by the New Zealand Institute of Economic Research, this country’s agricultural export revenue for the almost-five months from 1 February to 24 June – was up nearly $1 billion on the same period last year.

This kept processing plants, packhouses and supply chain partners active and although the wind was knocked out of forestry, seafood and manufacturing, export sales, ports around the country report optimism and increasing volumes as the world gets to grips with an altered reality.

Keeping goods moving and services “open for business” has been paramount to ensuring that the country’s economic recovery across the board is given a fighting chance.

Many businesses that occupy industrial space have reassessed their capability and physical footprint needs – some retrenching space and others expanding – and Bayleys has been involved with numerous lease restructuring and subleasing transactions to facilitate this.

The mantra being touted by the country’s leaders and echoed by the business community is to “support local” as we try to emerge from the Covid-19 scenario in a sound fiscal position.

The manufacturing sector is hopeful that New Zealanders will support locally made products and the clothing industry is one that may be regenerated on the back of this new wave of patriotism.

With global supply chains still fragmented, perhaps Kiwi ingenuity will really come to the fore and we’ll see an invigorated manufacturing industry – one that helps with domestic employment fundamentals at the same time as bringing out local pride.

Just how “think and buy local” will translate into demand within the industrial property market is yet to be fully seen. But there’s plenty of activity in the sector right now – both in a traditional usage context and in the hunt for premises to cater for new niche businesses.

Bayleys’ research shows vacancy levels are sub-1.5 percent across prime and secondary industrial stock in the Auckland region and there’s similar patterns being observed in other main centres.

Rents appear stable for now, and incentives – while still being offered on a case-by-case basis in some instances – have also stabilised.

E-commerce was already flying high pre-pandemic but with restrictions on physical movements during New Zealand’s staged series of lockdown measures, Kiwis got click-happy and demanded a lot from those businesses with online capability and expected those without a credible online platform to adapt and get with the programme.

Logistics and last-mile delivery operators have been under the pump since March as they moved from delivering essential goods only, to fulfilling orders placed in a full-blown spending frenzy once restrictions eased.

Courier companies have been searching for extra warehousing capacity, NZ Post has leased additional space to deal with rising parcel volumes, and retailers have been on the hunt for overflow storage space to satisfy growing online demand for goods.

NZX-listed Goodman Property Trust recently announced via its online AGM: “50 to 60 cents of each dollar going into property wants to go into industrial,” which is in-line with a global chase for logistics and industrial land, buildings, tenants and development sites.

As we brace ourselves for the repercussions of a potential second wave of Covid-19 in New Zealand and face the reality of a W-shaped recovery, we’re hopeful that the industrial property sector will remain resilient, adaptable and viable for landlords and tenant businesses alike.

Remember, Bayleys’ industrial leasing team is here to help and we’re always available at the end of the phone or email to talk about the market, opportunities and solutions.

For more property insights, see www.bayleys.co.nz/workplace

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