Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial

 
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
Market Indicators
Report | 2016

NEW ZEALAND INDUSTRIAL

Got Stock?
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
"Economic growth continues
 to support the expansion of
    the industrial sector."
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
Contents
Key Nationwide Trends                            1

Introduction                                     3

Key Findings                                     3

Industrial Market Indicators                     4

Auckland                                         5

Wellington                                       7

Christchurch                                     9

Regional Centres                                11

Industrial Leasing Activity                     13

Industrial Sales Activity                       15

Infrastructure Updates                          17

Industrial Developments                         19

Outlook                                         20

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Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
IN BRIEF

KEY                                                                 HAMILTON OVERALL

N AT I O N W I D E                                                    $81/m²      Average Warehouse Net Rent

TRENDS
                                                                     $129/m²      Average Office Net Rent
                                                                        7.8%      Average Yield
                                                                      297 ha      Waikato Industrial Zoned Vacant Land

OVER THE NEXT                                                                   Demand:
                                                                     Outlook: Demand:

12 MONTHS
                                                                                    Supply:
                                                                                  Supply:

                                                        CHRISTCHURCH OVERALL

                                                           2.1% Vacancy Rate

                                                         $90/m²   Average Warehouse Net Rent
                                                        $170/m²   Average Office Net Rent
       Economic growth continues to
                                                            8%    Average Yield
       support the expansion of the
       industrial sector. As tenant
                                                         559 ha   Canterbury Industrial Zoned Vacant Land

       demand intensifies, vacancy                      $285/m²   Average Land Value

       rates will reduce further.
                                                        Outlook: Demand:
                                                                  Supply:

                 Pace of construction activity is
                 not sufficient to keep up with
                 demand in Auckland.

                 Wellington’s pace of absorption
                 may slow over the next 12
                 months due to reducing supply
                 rather than decreasing demand.

       Christchurch’s market is likely
       to enter a period of change
       as demand pressures reduce
       fractionally after a continued
       period of significant demand.

                                                    1
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
AUCKL AND OVERALL

          2.2% Vacancy Rate

     $103/m²      Average Warehouse Net Rent
     $196/m²      Average Office Net Rent
        6.8%      Average Yield
      790 ha      Auckland Industrial Zoned Vacant Land
     $405/m²      Average Land Value                                  TAURANGA/
                                                                      MT MAUNGANUI OVERALL
      Outlook: Demand:
                  Supply:                                              $89/m²   Average Warehouse Net Rent
                                                                      $133/m²   Average Office Net Rent
                                                                         6.7%   Average Yield
                                                                       303 ha   BOP Industrial Zoned Vacant Land

                                                                      Outlook: Demand:
                                                                                Supply:

                                                                                Hamilton’s recent boost in leasing
                                                                         activity reduced vacancy rates and kept
               WELLINGTON OVERALL                                                      the pressure on investors.

                    3.6% Vacancy
                            Vacancy
                                 RateRate

                $99/m²      Average Industrial Gross Rent
               $130/m²      Average Office Gross Rent
                  8.6%      Average Yield
                                                                          Limited leasing availability in
                 133 ha     Wellington Industrial Zoned Vacant Land
                                                                          Tauranga’s industrial market
               $392/m²      Average Land Value
                                                                             continues to keep market
                                                                                       conditions tight.
                Outlook: Demand:
                            Supply:

                                                                            Tenants and investors are
                                                                             focused on quality, lower
DUNEDIN OVERALL                                                          maintenance costs and space
                                                                                efficiency in Dunedin.
$68/m²    Average Warehouse Net Rent
$113/m²   Average Office Net Rent
   8.6%   Average Yield
  48 ha   Otago Industrial Zoned Vacant Land                              Interest rates remain low, encouraging
                                                                          private investors, syndicators, unlisted
                                                                           and listed property vehicles to remain
Outlook: Demand:
                                                                            active in the most traded commercial
          Supply:                                                                property sector in New Zealand.

                                                                 2
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
Introduction
Constraints within the industrial sector are impacting on tenants                >> Interest rates remain low, encouraging private investors, syndicators,
and purchasers. Tenants searching for new or larger prime space are                 unlisted and listed property vehicles to remain active in the most
struggling to find suitable premises to work from while purchasers                  traded commercial property sector in New Zealand. A shortage
are struggling to find good stock to buy. This is leading to further                of stock and high levels of competition in the hotspots of recent
decreases in vacancy, increases in rents and yields firming to new                  years have boosted activity for the likes of Wellington, Hamilton
record lows.                                                                        and Dunedin which have not experienced the same levels of yield
                                                                                    appreciation in recent years.
Developers have upped the ante, but they too are experiencing
constraints in terms of land availability, pricing and suitable
infrastructure, as well as increasing material and labour costs.

The current outlook suggests more of the same for the next 12                                                      Overall Vacancy Rates - Three Main Centres
months. Little relief is forecast for new entrants who won’t meet
the market’s new pricing levels.                                                                                       6%
                                                                                                                                                                                          5.4%
                                                                                                                       5%

                                                                                    Overall Vacancy Rate
                                                                                                                       4%                                                                                    3.6%

Key Findings
                                                                                                                                                             3.1%
                                                                                                                       3%        2.6%
                                                                                                                                               2.2%                          2.1%
                                                                                                                       2%

>>Economic growth continues to support the expansion of the                                                            1%

  industrial sector. Businesses are optimistic in future orders,                                                       0%
  production, output and are also realistic in their employment                                                                 Auckland     Auckland    Christchurch Christchurch      Wellington        Wellington
                                                                                                                                 Feb 15       Feb 16       Sep 14       Sep 15           Nov 14            Nov 15
  intentions. Whereas tenant demand intensifies, vacancy rates
  will reduce further.                                                                                                      Source: Colliers International Research

>>In the main centres, capacity may become an issue as the pace
  of construction activity is not sufficient to keep up with demand,
  particularly in Auckland. This will keep rents rising steadily, but
  likely below 3% p.a.                                                                                             2015 New Zealand Property Sales
>>Wellington’s pace of absorption may slow over the next 12 months
  due to reducing supply rather than decreasing demand. Tenants                                                        100%
  are finding it increasingly difficult to locate suitable space to lease.                                              90%
                                                                                                                       80%                                                                           99
  Consequently, rents will rise – possibly at higher rates than in the
                                                                                                 Proportion of Sales

                                                                                                                                            2033                       215
                                                                                                                        70%
  past 12 months.
                                                                                                                       60%
>> Christchurch’s market is likely to enter a period of change as demand                                               50%                                                                           60
   pressures reduce fractionally after a continued period of significant                                               40%
                                                                                                                                            1084                        95
   demand. New rents are likely to remain broadly in line with current                                                  30%
                                                                                                                                                                                                     57
                                                                                                                       20%
   rates, albeit around 10% above pre-earthquake rates.                                                                                     536                         53
                                                                                                                        10%
                                                                                                                                                                                                     36
>>Hamilton’s recent boost to leasing activity reduced vacancy rates                                                     0%
                                                                                                                                            411                         45

  and kept the pressure on investors when bidding for prime space.                                                                          $Limited leasing availability in Tauranga’s industrial market
  continues to keep market conditions tight. Tauriko is a hotspot of
  activity, signalling that well-serviced land supply is a key factor to
  alleviate demand pressures, especially for the continuation of the                                               New Zealand Vacant Industrial Land Supply
  building sector and ports and logistics sector. Investor appetite
  remains high, with 5% yields a more common occurrence.                                                               900
                                                                                     Vacant Industrial Land (ha)

                                                                                                                       800
>>The gap between prime and secondary property performance                                                             700
  in Dunedin continues to increase. Tenants and investors are                                                          600
  focused on quality, lower maintenance costs and space efficiency.                                                    500
                                                                                                                       400
  Several strongly performing local and national businesses are
                                                                                                                       300
  undertaking major industrial development projects. Competition                                                       200
  from purchasers remains strong supported by attractive debt                                                          100
  costs to yield gaps.                                                                                                      0
                                                                                                                                 Auckland    Bay of Plenty Canterbury        Otago      Waikato           Wellington
                                                                                                                                  Region        Region       Region          Region     Region             Region

                                                                                                                                                         Nov 14  Nov 15

                                                                                                                                   Source: Colliers International Research

                                                                             3
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
New Zealand Industrial Market Indicators Q1 2016
                                                                                                                              Secondary
                            Vacancy                                                                        Prime Capital                                   Secondary
                                               Net Prime Rents                Net Secondary Rents                              Capital       Prime Market
            Precinct          Rate                                                                             Value                                      Market Yields
                                                  ($/m²)***                        ($/m²)***                                    Value*       Yields (%)**
                              (%)                                                                             ($/m²)*                                        (%)**
                                                                                                                               ($/m²)
                            OVERALL        OFFICE         WAREHOUSE          OFFICE          WAREHOUSE

 AUCKLAND                    Feb-16      LOW     HIGH    LOW      HIGH    LOW      HIGH      LOW    HIGH    LOW     HIGH     LOW     HIGH        LOW     HIGH     LOW     HIGH

 Airport Corridor             1.1%       210      230     107      120     150     190       75      90     1,825    2,365   1,090   1,570       6.00%   7.00%    7.00%   8.25%

 East Tamaki                  1.2%       210      240     110      125     150     190       85      95     1,925    2,465   1,225   1,690       6.00%   6.75%    6.75%   8.00%

 Manukau/Wiri                 2.6%       210      230     105      120     140     180       80      90     1,865    2,470   1,150   1,600       5.75%   6.75%    6.75%   8.00%

 Mt Wellington                2.3%       210      245     110      125     150     190       85     100     1,925    2,710   1,225   1,750       5.50%   6.75%    6.75%   8.00%

 Penrose/Onehunga             0.1%       210      235     110      125     150     190       85     100     1,925    2,675   1,225   1,750       5.50%   6.75%    6.75%   8.00%

 Rosebank/Avondale            5.2%       200      235     105      120     130     170       75      95     1,835    2,385   1,075   1,630       6.00%   6.75%    6.75%   8.00%

 New Lynn                     1.3%       190      230     105      120     160     190       75      90     1,660    2,185   1,150   1,570       6.50%   7.35%    7.00%   8.00%

 Henderson                    1.1%       190      230     105      120     160     190       75      90     1,660    2,185   1,150   1,570       6.50%   7.35%    7.00%   8.00%

 Mairangi Bay                 2.1%       210      265     110      125     180     210       105    110     2,000    2,780   1,715   2,165       5.50%   6.50%    6.00%   7.00%

 North Harbour                1.1%       200      250     105      125     170     200       105    110     1,910    2,855   1,685   2,135       5.25%   6.50%    6.00%   7.00%

 Wairau Valley                1.7%       180      230     100      115     140     200       100    105     1,785    2,630   1,470   2,065       5.25%   6.50%    6.00%   7.35%

 WELLINGTON                  Nov-15

 Seaview                      4.1%       145      175     110      135      90     120       65      95     1,090    1,515    150     235        7.25%   8.25%    8.50%   10.00%

 Grenada                      0.2%       135      170     105      130     100     130       85     100     1,060    1,485    155     235        7.25%   8.25%    8.50%   9.75%

 Miramar/Rongotai             0.6%       125      150      95      115     100     120       75      90      805     1,130    200     280        7.75%   9.00%    9.00%   10.00%

 Ngauranga                    4.4%       150      185     120      145     115     155       90     115     1,190    1,705    210     315        6.75%   8.00%    8.00%   9.50%

 Petone/Alicetown             4.5%       140      170     110      135     125     155       95     115     1,095    1,555    205     315        6.75%   7.75%    8.00%   9.75%

 Porirua                      4.2%       130      150     105      120      95     115       70      85     1,065    1,355    150     250        7.00%   8.00%    8.00%   10.00%

 Naenae/Wingate               3.4%       125      160      95      120      85     100       55      80      855     1,225    145     230        7.75%   8.75%    8.75%   10.25%

 Upper Hutt                   3.4%       115      140      85      105      80     100       55      75      675     1,030    120     190        8.00%   9.25%    9.25%   10.50%

 CHRISTCHURCH                Sep-15

 Hornby/Islington             1.1%       170      230      90      120     135     175       70      90     1,415    2,185    950    1,380       6.00%   7.00%    7.50%   8.50%

 Middleton/Sockburn           2.0%       170      230      90      120     135     175       70      90     1,415    2,185    950    1,380       6.00%   7.00%    7.50%   8.50%

 Sydenham                     3.6%       170      250      90      125     135     175       70      95     1,415    2,310    950    1,430       6.50%   7.50%    7.75%   8.75%

 Riccarton/Addington            -        170      250      90      125     135     175       70      95     1,415    2,310    950    1,430       6.50%   7.50%    7.75%   8.75%

 Bromley                        -        140      170      75      95       95     125       50      70      880     1,420    470     925        7.75%   10.00%   8.75%   12.50%

 Woolston                       -        170      220      90      120     125     165       65      85     1,370    2,075    855    1,265       7.25%   8.25%    8.50%   9.50%

 HAMILTON

 Hamilton                       -        130      170      75      120      90     125       55      75     1,110    2,000    690    1,065       6.50%   7.75%    8.00%   9.00%

 TAURANGA

 Tauranga/Mount Maunganui       -        145      165      95      110     100     120       70      80     1,615    2,200    950    1,305       5.50%   6.50%    6.75%   8.00%

 DUNEDIN

 Inner City                     -        130      220      75      125      70     100       45      75     1,075    2,135    500    1,000       6.75%   8.00%    8.00%   10.00%

 Kaikorai Valley                -        100      180      60      95       60     100       40      60      775     1,545    420     775        7.25%   8.75%    8.75%   10.50%

 Mosgiel                        -         90      150      55      90       60      90       40      55      710     1,405    420     710        7.25%   8.75%    8.75%   10.50%

Source: Colliers International Research
Assuming 2,000m² building with 50% site coverage
*Based on net combined rents of warehouse and office rents (assumes warehouse/office ratio of 80/20) and assuming fully leased at market rates
**Assumes freehold where appropriate
*** Wellington based on gross rents
Note: figures are rounded

                                                                                         4
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
Auckland Industrial Vacancy by Precinct

               4%
                                                                                                                                                                                                                                                         Auckland
               3%                                                                                                                                                                                                                                        Demand Outpacing Supply
Vacancy Rate

               2%                                                                                                                                                                                                                                        Auckland’s industrial vacancy remained at a record low 2.2% in
                                                                                                                                                                                                                                                         the latest Colliers International survey. Prime vacancy edged up
               1%                                                                                                                                                                                                                                        fractionally to 1.7% while secondary vacancy reduced to 2.4% over
                                                                                                                                                                                                                                                         the past year. The rise in prime space reflected the increase in stock,
               0%
                                                                                                                                                                                                                                                         which had some leasing capacity, but not much considering there
                                                                                                    Airport Corridor

                                                                                                                                                          Mairangi Bay

                                                                                                                                                                                  North Harbour

                                                                                                                                                                                                    Wairau Valley
                       Overall

                                    Onehunga/Penrose

                                                            Rosebank/Avondale

                                                                                    Mt Wellington

                                                                                                                       Manukau/Wiri

                                                                                                                                        East Tamaki

                                                                                                                                                                                                                    New Lynn

                                                                                                                                                                                                                                Henderson
                                                                                                                                                                                                                                                         was 169,000 sqm of space constructed over the past year.

                                                                                                                                                                                                                                                         Overall net absorption in Auckland’s industrial sector, which takes
                                                                                                                                                                                                                                                         into consideration supply and vacancy changes, reached 180,000
                                                                                                                                                                                                                                                         sqm over the past year. Although this is lower than the 235,000 sqm
                                                                                                           Feb 15  Feb 16                                                                                                                              reached in February 2015, it signals a lack of space to lease rather
                                                                                                                                                                                                                                                         than a lack of demand.
                                           Source: Colliers International Research

                                                                                                                                                                                                                                                         Industrial sector occupier demand is growing from the land-
                                                                                                                                                                                                                                                         extensive users of transport and storage as well as the variety of
                                                                                                                                                                                                                                                         needs in the construction sector. The manufacturing sector is still
                                                                                                                                                                                                                                                         the major GDP contributor of the sector and has found a natural
               Industrial Investor Confidence Survey - Three Main Centres                                                                                                                                                                                base line after the incremental decreases in business numbers and
                                                                                                                                                                                                                                                         employment between 2005 and 2009.
               80%
               60%
                                                                                                                                                                                                                                                         The relentless occupier demand that Auckland is experiencing
                                                                                                                                                                                                                                                         will keep developers in pursuit of locating suitable land to develop
               40%
                                                                                                                                                                                                                                                         for tenants and owner-occupiers. However, constraints on finding
Net Percent

               20%
                                                                                                                                                                                                                                                         suitably zoned land remain. The latest Colliers International Vacant
                0%
                                                                                                                                                                                                                                                         Industrial Land survey shows that net absorption increased to one
                      Mar 09

                                 Sep 09

                                                       Mar 10

                                                                           Sep 10

                                                                                           Mar 11

                                                                                                        Sep 11

                                                                                                                       Mar 12

                                                                                                                                      Sep 12

                                                                                                                                                      Mar 13

                                                                                                                                                                         Sep 13

                                                                                                                                                                                           Mar 14

                                                                                                                                                                                                         Sep 14

                                                                                                                                                                                                                    Mar 15

                                                                                                                                                                                                                               Sep 15

                                                                                                                                                                                                                                            Mar 16

               -20%
                                                                                                                                                                                                                                                         of its highest rates since 2008, approximately 76 ha. This leaves
               -40%
                                                                                                                                                                                                                                                         approximately 790 ha of zoned vacant industrial land, of which
               -60%
                                                                                                                                                                                                                                                         approximately half is in the south of Auckland and almost 20% is
               -80%                                                                                                                                                                                                                                      owned by Auckland International Airport. The limited land supply
                                                                                      Auckland                             Wellington                                    Christchurch                                                                    is forcing values up in the most popular established areas in the
                                                                                                                                                                                                                                                         south, now reaching mid $400/sqm.
                                                       Source: Colliers International Research

                                                                                                                                                                                                                                                         Rents and Yields Sharpen Further
                                                                                                                                                                                                                                                         Capacity pressures in Auckland may become an issue as the pace
                 127-131 Pilkington Road                                                                                                                                                                                                                 of construction activity is not sufficient to keep up with demand.
                 Glen Innes, Auckland
                                                                                                                                                                                                                                                         This will keep rents rising steadily, but likely sub-3% p.a. due to the
                                                                                                                                                                                                                                                         existing number of rental agreements linked to the Consumer Price
                                                                                                                                                                                                                                                         Index (CPI).

                                                                                                                                                                                                                                                         These moderate rental increases in a high occupier demand
                                                                                                                                                                                                                                                         environment is not deterring investors from heightened levels of
                                                                                                                                                                                                                                                         purchasing activity. Low interest rates in a growing economy are
                                                                                                                                                                                                                                                         keeping purchasers competitive at auctions and negotiations. Vacant
                                                                                                                                                                                                                                                         stock above $5 million will reach mid-6% with well covenanted prime
                                                                                                                                                                                                                                                         stock reaching low 5%. Investors, owner-occupiers and syndicators
                                                                                                                                                                                                                                                         are all rummaging through any opportunities that become available.
                                                                                                                                                                                                                                                         This will keep the pressure on yields to keep reaching new lows.
                                                                                                                                                                                                                                                         The focus on capital appreciation will keep already active investors
                                                                                                                                                                                                                                                         trading, but may limit the number of new entrants until more stock
                 Goodman (NZ) Limited have purchased a 5.8 hectare industrial
                 site at 127-131 Pilkington Road in Glen Innes for $30.3 million.                                                                                                                                                                        becomes available.
                 The warehouse and showroom spaces cover a total area of 20,400
                 sqm. Under the PAUP, the site is designated for high density
                 redevelopment and mixed use zoning which includes residential
                 with a height limit of 16.5m.

                                                                                                                                                                                                                                                     5
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
North Harbour                                                                           Mairangi Bay
                                         $438                5.9%                                                                $475   6.0%

                                         $115                0.6%      18                                                        $118   2.9%
                                                                                                                                                             KEY

                                                                                                     SOU
                                                                                                      TH
                                                                                                                                                                        Industrial Areas

                                                                                                       ER
                                                         Y

                                                                                                           N
                                                     W
                                                 M                                                                                                                         Major Roads

                                                                                                           MW
                                        O   UR
                                                               Wairau Valley

                                                                                                                Y
                                     RB                                                                                                                                    Railway Line
                                HA                                  $450       5.9%
                           ER                                                                                                                                       Average Prime Land
                                                                                                                                                                          Values ($/m2)
                     P

                                                                    $108       1.7%*
                UP

                                                                                                                                                                       Average Prime
                                                                                                                                                                Investment Yields (%)

                                                                                                                                                            Average Prime Warehouse
     N O RT H

                                                                                                                                                                        Rents ($/m2)

                                                                                                                             Auckland CBD                    Prime Vacancy Rates (%)
                ES
         W

                     TE
                          RN                                   Rosebank/Avondale
                               MW
                                     Y                              $375       6.4%                                                                                   Trend: Mar 15 - Mar 16
                                                                    $113       5.2%                                                                         0%/$0     Actual: Mar 16 Figure
                                                                                                 16

            Henderson                                                                                                    Penrose/Onehunga
                                                                     Rosebank Road Interchange
                      $375                  6.9%                                                                                 $400   6.1%
                      $113                  0.7%                                                                                 $118   0.1%                 Mt Wellington
                                                                                       SO
                                                                                            UT
                                                                                                 H                                                               $425         6.1%
                                                                                                     WE
                                                                                                          ST
                                                                                                               ER                                                $118         0.3%
                                                                                                                    N
                                                                                                                        MW
                                                                                                                             Y
                                                               New Lynn
                                                                    $375       6.9%                                                                                      East Tamaki
                                                                    $113       2.6%*                                                                                          $413         6.4%

                                                                                                                                                                              $118         1.1%

                                                                                                                                                             Highbrook Drive Interchange

                                                                               Airport Corridor/
                                                                               Mangere                                                                       Manukau/Wiri
                                                                                   $400              6.5%
                                                                                                                                               20                $365          6.3%

* Overall Vacancy                                                                  $114              1.8%                                                        $113          3.6%

Auckland Industrial Market Review
2016 compared to 2015

Occupier Demand                                                                        Rentals                                                      Investor Demand
Enquiry =                                                                             Average prime grade =                                        Record levels =  demand,  prices
Business confidence =                                                                 Warehouse  $114/m2                                          Access to funding  = sustained demand
                                                                                       Office  $220/m2                                             Buyer groups = private, institutions,
Supply =  Demand = 
                                                                                       Incentives = 2 weeks/year of                                 syndicators
Vacancy                                                                                term
                                                                                                                                                    Land Supply
Prime grade = 1.7% (Feb 2016)
                                                                                       Investment Sales                                             Enquiry = 
Secondary grade = 2.4% (Feb 2016)
                                                                                                                                                    Available land for sale = 
                                                                                       Average prime yields = 6.4%
Spec build activity =                                                                                                                              Value pressure = 
                                                                                       Average secondary yields = 7.3%

                                                                                                                                  6
Got Stock? Market Indicators Report | 2016 - NEW ZEALAND INDUSTRIAL - True Commercial
Wellington
                                                                                             Wellington Industrial Vacancy by Precinct

                                                                                             12%

Space Shortage?                                                                              10%

                                                                              Vacancy Rate
                                                                                              8%
Demand for industrial space in Wellington pushed the vacancy
rate to a record low 3.6% with less than 100,000 sqm of space now                             6%
available. This is well below the 9.0% reached in late 2012. The
                                                                                              4%
majority of the reduction was due to stronger tenant demand
and practically no new supply. More than 70,000 sqm of vacant                                 2%
industrial space has been absorbed in the past two years. The
                                                                                              0%
latest Performance of Manufacturing Index (PMI) points to

                                                                                                                                                                                                                                     Miramar
                                                                                                    Overall

                                                                                                               Seaview

                                                                                                                         Petone/Alicetown

                                                                                                                                            Grenada North

                                                                                                                                                            Naenae/Wingate

                                                                                                                                                                             Ngauranga

                                                                                                                                                                                         Porirua

                                                                                                                                                                                                   Upper Hutt

                                                                                                                                                                                                                Kilbirnie/Rongotai
further growth in the sector along with employment numbers
encouraging further positive absorption in space over 2016.

Exacerbating the supply shortage in the future is the growing
trend of conversions of industrial space to bulky goods. Recent
examples include NZ Post’s mail sorting centre to a Bunnings,                                                                                           Nov 14  Nov 15
the former Colgate Palmolive factory into a Briscoes and Rebel
Sport (demolition complete) and the former Feltex factory into a                                              Source: Colliers International Research

Kmart (resource consent issued). We are aware of other national
operators looking for more conversion opportunities. Flood
protection improvement plans for the Hutt River Stopbank in
Lower Hutt and the $270 million Petone to Grenada link road                                  9-15 John Seddon Dr
                                                                                             Elsdon, Porirua
estimated to start in 2019 will also reduce the total stock to make
way for the major projects.

The latest Colliers International Vacant Industrial Land supply
survey shows further traction in land absorption last year in the
Wellington region (including the Wairarapa). Approximately 20 ha
of land was absorbed, up from approximately 13 ha last year.

Rising Cash Flow and Values
Industrial property rents in the capital city have been rising steadily
over the past year. Rents have increased by approximately $5/sqm
to $10/sqm across most precincts. This has seen Wellington moving
firmly away from the flat rental rates that provided some of the most
affordable rates out of the main centres in New Zealand. Rent rises                          Rockport Holdings sold their former Mitsubishi Motors Vehicle
will continue as demand, supported by confidence in the business                             Assembly Plant for $33 million to MAAT Group, returning an 8.86%
environment, continues to outweigh supply.                                                   yield. The 52,180 sqm building is occupied by a range of tenants such
                                                                                             as Mitsubishi, Hannahs, Downer and Placemakers. The property’s
The change in optimism was most recently noted in the latest                                 WALT as of sale was circa 6.1 years.
Colliers International Investor Confidence survey. In the March
2016 quarter, investors were a net positive 25% (optimists minus
pessimists) in their expectations on rising rents, decreasing
vacancy and higher returns. This is the highest rate since the survey                        39-49 Randwick Rd
began in late 2008. Capital appreciation is one of the key ingredients                       Seaview, Lower Hutt
to this recent bout of confidence. Continued economic support for
occupiers and low interest rates to augment returns, bodes well for
Wellington’s investment sector for the medium term.

The next 12 months will see a continuation of the steady purchasing
demand from owner-occupiers moving to larger and higher quality
premises especially for properties $2 million or less. A recent
example includes Metco moving from Wingate to Seaview. Investors
are back in greater numbers for properties valued $2 million or
more, but the lack of new and high quality properties to purchase
is inhibiting yields from firming at faster rates. However, the recent
rises in rents and the growing confidence in the market is leading
to a tipping point that will likely see more brownfield development
occur than in recent years. This could lead to further investment
                                                                                             Argosy leased 3,710 sqm at 39-49 Randwick Road in Seaview,
and owner-occupier opportunities for a ‘starved’ investor market in                          Wellington to Precision on a six-year lease. The area comprises of
the near future.                                                                             warehouse, showroom and a separate office building.

                                                                          7
KEY
                                                                                                                                          Upper Hutt
               Industrial Areas
                                                                                                                                             $150       9.3%
                  Major Roads
                                                                                                                                             $80        3.4%
                  Railway Line                      Porirua
        Average Overall Land                              $225          8.3%
               Values ($/m2)                                                                                           INDICATIVE TRANSMISSION
              Average Overall                             $95           4.2%                                           GULLY MOTORWAY
        Investment Yields (%)

            Average Overall                                                                                                                  2
                                                                                                       Grenada North

                                                                                         WY
    Warehouse Rents* ($/m2)

                                                                                     A M
   Overall Vacancy Rates (%)                                                                                $263       8.4%

                                                                                 IRU
                                                                                                            $105       0.2%
            Trend: Mar 15 - Mar 16                                                                                                                  Wingate/Naenae

                                                                                POR
   0%/$0    Actual: Mar 16 Figure                                                                                                                      $188    8.9%

                                                                               LLE
                                                                                      1
                                                                                                                                                       $88     3.4%

                                                                           NVI
                                             Ngauranga

                                                                          NSO
                                                   $575          8.1%
                                                                                                 2                             Petone/Alicetown
                                                   $118          4.4%    JOH
                                                                                                                                  $650     8.6%
                                                                                                                                  $114     4.5%

                                     Wellington CBD
                                                                                                                   Seaview/Gracefield
                                                                                                                        $313       8.5%
                                                                                                                        $101       4.1%
                                        Kilbirnie/Rongotai
                                            $775          8.9%
                                            $94           1.0%                   Miramar
                                                                                          $775       8.9%
                                                                                          $94        0.0%

* Based on gross face rents

Wellington Industrial Market Review
2016 compared to 2015

Occupier Demand                                                                      Investment Sales
Enquiry =                                                                           Average prime yields = 7.9%
Business confidence =                                                               Average secondary yields = 9.2%
Supply =    Demand = 

                                                                                     Investor Demand
Vacancy
                                                                                     Record levels =  demand,  prices
Overall vacancy = 3.6% (Nov 2015)                                                    Buyer groups = private, institutions
New build activity =
                                                                                     Land Supply
Rentals                                                                                             
                                                                                     Enquiry =
Overall average*: Warehouse  $99/m2                                                 Available land for sale =                
                      Office  $130/m2                                               Value pressure =       

                                                                                      8
Christchurch
                Christchurch Industrial Vacancy by Precinct

                7%
                6%
                                                                                                             Transition Period Ahead
Vacancy Rate

                5%
                4%
                3%                                                                                           Christchurch’s economy continues to outperform New Zealand’s,
                2%                                                                                           reflecting the progress in earthquake rebuild activity. Colliers
                1%
                                                                                                             International’s latest vacancy survey is at 2.1% — down from 6.2%
               0%
                                                                                                             in 2012. However, there is a noticeable transition occurring with
                           Overall

                                                  Hornby/Islington

                                                                         Middleton/Sockburn

                                                                                              Sydenham
                                                                                                             more opportunities arising for tenants. The growth in supply and
                                                                                                             fractionally lower expectations of sector expansion will ease tenant
                                                                                                             pressure to locate to new premises over the short to medium-term.

                                                                                                             The focus for tenants remains on leasing quality and new stock
                                                                                                             in popular locations. This is apparent from recent activity like
                                                          Sep 14  Sep 15
                                                                                                             Freightways, Fletchers Easy Steel, Hellaby Holdings Industrial
                               Source: Colliers International Research                                       Group’s NZ Trucks and AB Equipment to name a few of the most
                                                                                                             recent new builds either signed or in progress.

               Glassworks Industry Park                                                                      ‘Yield Hungry’ Investors Keep Rents Sharp
               652 Halswell Junction Rd, Halswell, Christchurch
                                                                                                             Similar to other locations nationally, there is a sizeable number of
                                                                                                             investors and owner-occupiers looking to secure stock. The focus for
                                                                                                             many investors is on tenanted stock given the transition the occupier
                                                                                                             market is likely to experience over the short-term. Well covenanted
                                                                                                             investment stock under will often reach low 6% yields, as investors
                                                                                                             compete for returns in a low interest rate environment.

                                                                                                             Despite rising construction costs, sharp yield expectations in the
                                                                                                             current environment are keeping development activity profitable
                                                                                                             and offsetting the need to significantly increase rents. New warehouse
                                                                                                             rents are now just over $100-$115/sqm. New combined rents (ratio
                                                                                                             of 80% warehouse and 20% office) are likely to remain broadly in
                                                                                                             line with current rates over the next 12 months, albeit around 10%
                                                                                                             above pre-earthquake rates.
               Goodman sold their Glassworks Industry Park to Mainland Capital for
               $38.9m in late 2015. The Glassworks Industry Park portfolio comprises
               three buildings housing premium businesses MOVE Logistics, DHL,
               Packaging House, Cirtex and Bridgestone. Total net lettable floor area
               is nearly 30,000 sqm which is spread over 3.5 ha. All the buildings were
               completed in 2014 and have a staggered lease expiry.

               Progressive Distribution Centre
               146 Shands Rd, Hornby South, Christchurch

               Augusta Capital purchased Progressive distribution centre in Hornby
               South for $39,525,000 million from Virgo Group. Augusta plans to
               syndicate the property. The property is leased to General
               Distributors, a subsidiary of Progressive Enterprises. The building is
               situated on 71,811 sqm and underwent significant additions and
               alterations in 2012.

                                                                                                         9
CHRISTCHURCH
                      INTERNATIONAL
                            AIRPORT                                                                              74

                                                                                                                 Bromley
                                                                   Riccarton                                          $150   8.9%
                               73                                      $363    7.0%
                                                                                                                      $85
                                                                       $108
              Hornby/Islington
                                                                                          Sydenham
                   $250          6.5%
                                                                                                $363      7.0%
                   $105          0%
                                                                                                $108      0%

                                                                                           73

                                        Sockburn/Middleton
  KEY                                      $263      6.5%                             Portlink Industrial Park

              Industrial Areas             $105      0.9%

                 Major Roads                                                           Woolston/Hillsborough
                 Railway Line                                                              $205        7.8%
          Average Prime Land                                                               $105
                Values ($/m2)                     75
             Average Prime
      Investment Yields (%)
           Average Prime
   Warehouse Rents ($/m2)
   Prime Vacancy Rates (%)

            Trend: Mar 15 - Mar 16
  0%/$0     Actual: Mar 16 Figure

Christchurch Industrial Market Review
2016 compared to 2015

Occupier Demand                                          Investment Sales
Enquiry =                                               Average prime yields = 7.2%
Business confidence =                                   Average secondary yields = 8.7%
Supply =  Demand = 
                                                         Investor Demand
Vacancy
                                                         Record levels =  demand,  prices
Prime grade = (Sep 2015)
                                                         Buyer groups = private, institutions, syndications
Secondary grade = (Sep 2015)
Spec build activity = 
                                                         Land Supply
Rentals                                                  Enquiry = 
                                                         Available land for sale = 
Prime Grade: Warehouse     $103/m2
                                                         Value pressure = 
		              Office  $195/m2

                                                         10
Regional Centres                                                               Hamilton
                                                                               In a market that has stock, occupier demand for larger ‘sheds’ have
                                                                               been one of the stand-outs for Hamilton’s industrial sector over the
Tauranga                                                                       past 12 to 18 months. This is assisting with bringing the vacancy rate
                                                                               to lower levels given the floor sizes of the warehouses being leased.
Persistently low levels of availability remains the key challenge for
tenants searching for new space. The lack of options means many                The majority of the take-up is coming from the owner-occupier
tenants are staying put, in turn reducing the number of leasing                sector who are taking advantage of the current market environment
enquiries recorded.                                                            of low interest rates, availability and the expectation that rents are
                                                                               likely to start increasing at a faster rate sooner rather than later.
Although new build premises are capturing rent rises due to                    Anecdotally, the rent versus mortgage payment equation has been
construction costs increases, rents for existing premises have                 investigated by many — including the banks — often finding that
been more stable over the past year. However, the tension is                   the option should be pursued, especially given the upside potential
mounting and it is likely that landlords will look to increase                 of capital value appreciation, which has been remarkable in
rents shortly. The exception is the owners of older, less efficient,           Hamilton over the past year.
secondary space which will likely face greater resistance from
                                                                               Although the rural sector remains in the spotlight for most New
tenants to such discussions.
                                                                               Zealanders, and is a prominent industry in the Waikato, the focus
Occupier demand remains broad based, but still particularly                    and intensification has been on the farm in recent years. This has
focused on the building sector and the ports and logistics sector.             meant that there was limited exposure to the industrial sector this
The underlying demand for space and steady rental cash flow has                cycle with the farming community regarded as being ‘net divestors’.
been a key reason for high levels of investor and owner-occupier               However, the number of investors for sub-$5 million properties
activity. The market is still dominated by locals, but an increasing           remains strong, a feature of all industrial markets across New
number of investors from outside the region are more actively                  Zealand. The number of investors in Hamilton’s industrial sector
participating in auctions and negotiations.                                    has started to increase as they take into consideration some of the
                                                                               benefits of ownership like low maintenance and management fees.
The level of enquiry for sub-$5 million industrial property has kept
competition high, with increasing purchase prices seeing yields                In a sector that is showing growing levels of optimism and activity,
often reaching 5% with firmer yields for sub $2 million properties.            the one disconnect is the significant amount of land supply
                                                                               currently zoned or with the potential for future industrial zoning as
There is little reason for the positive vibe in the sector to dissipate        identified in the District Plan by Hamilton City Council.
over the medium term. The increasing number of businesses,
                                                                               Colliers International’s latest Vacant Industrial Land survey showed
together with the expansion of existing businesses, is supported
                                                                               that there is currently 297 ha of land available, with a further 527
by population growth, increasing construction activity and rising
                                                                               ha of non-industrial zoned land earmarked for potential future
volumes at New Zealand’s largest freight gateway port.
                                                                               industrial use. In the past year, industrial zoned land absorption
                                                                               increased to 41ha with prominent sales like Ports of Auckland’s
                                                                               purchase of 33ha boosting demand and generating opportunities.

3 Hynds Rd                                                                     220 Ellis St
Gate Pa, Tauranga                                                              Frankton, Hamilton

3 Hynds Road sold for $4.95m to a private investor reflecting an 8%            220 Ellis St sold for $3.55m to a private investor reflecting an 8.08%
yield. The 4,280 sqm property is situated on a 6,220 sqm freehold site.        yield. The property is anchored by Fletcher Steel limited and their
The property has a new 5-year lease plus right of renewals with a              current lease has recently been renewed to 2018 with renewals
rental income of $396,000 p.a.                                                 through to 2021. The 3,830 sqm property returns a net income of
                                                                               $286,882 p.a.

                                                                          11
Dunedin                                                                             "The number of investors
The limited opportunities to develop more modern, quality industrial
space in the Dunedin market is driving the continuing gap between                 for sub-$5 million properties
prime and secondary property performance. Demand outweighs
supply in the prime sector, leading to increasing rents.                           remains strong, a feature of
The lower demand for less modern, secondary buildings in New                      all industrial markets across
                                                                                          New Zealand."
Zealand’s oldest town, is keeping vacancy rates high. We are seeing
a rising number of tenants missing out on prime space, reluctantly
staying put, with some investigating new build opportunities
especially as business confidence grows.

Several strongly performing local and national businesses are
undertaking major industrial development projects in Dunedin:
brewing giant Lion is constructing a $6 million facility in Anzac
Ave on a 1.4 ha site for local brewery Emerson’s, Port Otago
subsidiary Chalmers Properties is building a $9.45 million, 4,650
sqm warehouse and office for Steel & Tube on an 8,000 sqm site at
197 Fryatt St and Pallet provider Chep New Zealand has opened a
$4 million office and warehouse development in Sturdee St.

Investment activity remains buoyant, but the high number of
leasehold properties and the reluctance of owners to sell in a tight
market has slowed activity in recent months. This has kept values
appreciating. When good opportunities do arise, they are well
received and competed for by investors and owner-occupiers.

The majority of purchasers are locals, with a number of smaller
value lot premises within the region also enjoying some of the
country’s largest gaps between debt costs and returns. A recent
example includes 9-11 Lorne St which sold mid-last year, partially
vacant for $600,000 at a yield of approximately 8% based on a fully
leased basis. Opportunities for owner-occupiers are also available
with a vacant building on leasehold land at 353 Andersons Bay Rd
one example which was also sold mid-last year for $650,000.

Emerson’s Brewery Development
Anzac Ave, Central Dunedin

Brewing giant Lion has completed a $6 million facility on Anzac Ave for
local brewery Emerson’s. Emerson’s are relocating from their current
facility located in Wickliffe St. The new site of approx. 1.4 ha sits on a
main arterial route, in close proximity to Forsyth Barr Stadium.

                                                                             12
A Selection of New Zealand Industrial Leasing Activity
Address                               Precinct                 NLA (m2)    Date                 Tenant
AUCKLAND

40-44 Victoria St                Onehunga, Auckland             21,000    Q2 2016            Geodis Wilson

15 Kerwyn Ave                    East Tamaki, Auckland          13,000    Q1 2016    New Zealand Panels Group Ltd

4 Henderson Pl                    Penrose, Auckland             11,363    Q3 2015               Compac

20 Timberly Rd                    Mangere, Auckland              9,000    Q1 2016       Winstone Wallboards Ltd

8-10 Gabador Pl                 Mt Wellington, Auckland          8,341    Q2 2016         Fletcher Steel Limited

1 Turin Pl                       East Tamaki, Auckland           8,272    Q3 2015         Carter's Tyre Service

30 Highbrook Dr                  East Tamaki, Auckland           8,041    Q2 2015            Move Logistics

827-831 Great South Rd          Mt Wellington, Auckland         ~ 6,000   Q4 2015            Ideal Electrical

17-19 Patiki Rd                   Avondale, Auckland             4,316    Q4 2015        Starz Evil Dead NZ Ltd

63 Tidal Rd                       Mangere, Auckland              2,970    Q3 2015           Scott Technology

153 Pilkington Rd                 Panmure, Auckland              2,833    Q2 2016      Waste Management NZ Ltd

24 Lady Ruby Dr                  East Tamaki, Auckland           2,560    Q4 2015          Sunnyside Glass Co

8 Hotunui Dr                    Mt Wellington, Auckland          2,140    Q3 2015             Connect 8 Ltd

15 Kerwyn Ave                    East Tamaki, Auckland           1,950    Q4 2015   Construction Techniques Group Ltd

8 Crooks Rd                      East Tamaki, Auckland           1,430    Q2 2016        Daikin Australia Pty Ltd

6b Donnor Pl                    Mt Wellington, Auckland          1,100    Q1 2016              AV Events

WELLINGTON

9-15 Meachen St                  Seaview, Lower Hutt             3,366    Q2 2015               NZ Post

39-49 Randwick Rd                Seaview, Lower Hutt             3,710    Q1 2016               Precision

111 Eastern Hutt Rd              Wingate, Lower Hutt             2,318    Q2 2015           Mexican Supplies

10 Surrey St                       Tawa, Wellington              2,039    Q4 2015               Connetics

Broken Hill Rd                      Elsdon, Porirua              1,778    Q2 2016             Placemakers

16 Shakespeare Ave               Trentham, Upper Hutt            1,480    Q2 2016               Hyundai

                                                          13
Address                                             Precinct                 NLA (m2)    Date                 Tenant
 CHRISTCHURCH

 Dakota Park                                    Christchurch Airport           12,500     2015               Freightways

 Hornby Quadrant, Sir James Wattie Dr           Hornby, Christchurch           12,000     2015            Fletcher Easy Steel

 5-9 Hickory Pl                                Islington, Christchurch          8,838    Q1 2016           Lumberworx Ltd

 Cnr Sawyers Arms & Johns Rds                  Redwood, Christchurch            6,150    Q1 2016             Z Energy Ltd

 Buildings 1, 2 & 3, 6-8 William Lewis Dr      Sockburn, Christchurch           4,412    Q4 2015       Netlogix Warehousing Ltd

 350 Wilsons Rd                                Waltham, Christchurch            3,305    Q3 2015        Containers & More Ltd

 Unit 2 652 Halswell Junction Rd               Halswell, Christchurch           2,874    Q1 2015         Cirtex Industries Ltd

 HAMILTON

 30 Gallagher Dr                                Frankton, Hamillton             5,080    Q3 2015         Energy Products Ltd

 12 Quentin Dr                                  Frankton, Hamillton             4,396    Q1 2016         Truck Stops (NZ) Ltd

 220 Ellis St                                   Frankton, Hamillton             3,824    Q3 2015           Fletcher Steel Ltd

 Strata Precision Plastics, 10-12 Wickham St    Frankton, Hamillton             2,360    Q2 2015   Strata Precision Plastics 2013 Ltd

 23A Tasman Rd                                   Te Rapa, Hamilton              1,642    Q1 2016        Leisure Line Caravans

 TAURANGA/MOUNT MAUNGANUI

 97C Aerodrome Rd                                Mount Maunganui                5,560     2015        Robert Monk Transport Ltd

 69-71 Aviation Ave                              Mount Maunganui               2,372*     2015     Fabweld Structural Engineers Ltd

 126 Aerodrome Rd                                Mount Maunganui                2,200     2015            Downer Utilities Ltd

 133B Totara St                                  Mount Maunganui                250       2015               Reid Rentals

 DUNEDIN

 Portsmouth Dr                                     South Dunedin                1,233    Q4 2015              Confidential

 86 Macandrew Rd                                   South Dunedin                1,030    Q1 2015            Plumbing World

 124 St Andrew St                                 Central Dunedin               500      Q4 2015       Central City Auto Repairs

 McNab St                                        Kenmure, Dunedin               500      Q1 2016              Confidential

Source: Colliers International Research
*Site area

                                                                         14
A Selection of New Zealand Industrial Sales Activity
                                                                           Sale          Capital
                                                                Sale
Address                                   Precinct                         Price          Value       Yield (%)             Vendor                    Purchaser
                                                                Date
                                                                            ($)          ($/m²)
AUCKLAND

127-131 Pilkington Rd                Glen Innes, Auckland      Q1 2016   $30,300,000      $1,485      Undisclosed       Kauri Tamaki Ltd         Goodman Property Trust

Otahuhu Power Station, 8-10
                                      Otahuhu, Auckland        Q1 2016   $30,000,000    Undisclosed   Undisclosed      Contract Energy Ltd       Stonehill Property Trust
Sparky Rd
319 & 323 Church St                   Penrose, Auckland        Q1 2016   $16,500,000    Undisclosed     6.85%        New Zealand Starch Ltd          Private Investor
2-8 Jarvis Way                       East Tamaki, Auckland     Q4 2015   $13,000,000    Undisclosed     5.50%       Royalwolf Trading NZ Ltd         Private Investor
88 Carbine Rd                       Mt Wellington, Auckland    Q4 2015   $12,000,000      $1,975        6.00%          88 Carbine Road Ltd           Private Investor
8 Tolich Pl                          Henderson, Auckland       Q3 2015   $11,500,000      $1,930        9.30%            Private Owner               Private Investor
                                                                                                                        Vizor Holdings &
64 Victoria St & 11 Spring St         Onehunga, Auckland       Q4 2015   $10,500,000    Undisclosed     Vacant                                      Private Developer
                                                                                                                        64 Victoria St Ltd
306 Neilson St                        Onehunga, Auckland       Q3 2015   $8,833,333       ~$1,320        7.49%        Metals Warehouse Ltd           Private Investor
15 Echelon Pl                        East Tamaki, Auckland     Q2 2016   $8,500,000       $2,069        Vacant              JKM Ltd                  Private Investor
3-5 Harbour Ridge Dr                    Wiri, Auckland         Q3 2015   $8,200,000       $2,497        5.88%             GDK Property               Private Investor
4 Carr Rd                             Mt Roskill, Auckland     Q2 2015   $7,700,000       ~$1,260       7.50%            Private Investor              Undisclosed
Bunnings Trade Centre, 494A
                                      Avondale, Auckland       Q3 2015   $7,580,000     Undisclosed     6.45%               Bunnings                 Private Investor
Rosebank Rd
 12 Cape Hill Rd                      Pukekohe, Auckland       Q3 2015   $5,300,000       ~$730         9.10%            Private Vendor              Private Investor
                                                                                                                                                 Northridge Estate (2001)
198 James Fletcher Dr                 Otahuhu, Auckland        Q2 2016   $5,100,000       $1,325        7.10%              Jfd 198 Ltd
                                                                                                                                                           Ltd
48-50 Stonedon Dr                    East Tamaki, Auckland     Q3 2015   $4,850,000       ~$1,350       Vacant         Stonedon Nominees             Private Investor
19-21 Hill St & 4 Newsome St          Onehunga, Auckland       Q2 2016   $4,471,000     Undisclosed   Undisclosed          Public Trust             415 Ti Rakau Ltd
4 Cebel Pl                         North Harbour, Auckland     Q4 2015   $4,200,000        $840       Undisclosed        Private Vendor              Private Investor

8 Kirkbride Rd                     Mangere Bridge, Auckland    Q2 2015   $4,000,000       $1,008        Vacant         Elevator Group Inc.       Austin Management Ltd

15 Inlet Rd                           Takanini, Auckland       Q2 2016   $3,375,000        $983         9.57%            Trade Depot Ltd             Private Investor
55 Greenmount Dr                     East Tamaki, Auckland     Q1 2016   $3,650,000       $1,557        6.50%            Private Vendor              Private Investor
14 Peters Way                         Silverdale, Auckland     Q1 2016   $3,125,000       $2,253        5.79%       Oasis Group Holdings Ltd         Private Investor
WELLINGTON
Todd Park, 9-15 John Seddon Dr          Elsdon, Porirua        Q3 2015   $33,000,000       $632         8.86%         Rockport Holdings Ltd           MAAT Group
                                                                                                                     Trent Property Holdings
Dante Rd/Alexander Rd                Trentham, Upper Hutt      Q3 2015   $9,999,990        $274         7.19%                                    Camperdown Studios Ltd
                                                                                                                               Ltd
                                                                                                                    Gracefield Investments Ltd   Land Innovation No.1 Ltd
120 Hutt Park Rd                     Gracefield, Lower Hutt    Q4 2015   $8,500,000       $1,122        8.47%
                                                                                                                              (Anaro)                    (Burrell)
11-13 Barnes St                      Seaview, Lower Hutt       Q2 2015   $6,100,000        $508         Vacant             Foodstuffs                Private Investor
11 Bell Rd South                     Gracefield, Lower Hutt    Q3 2015   $6,000,000        $527         9.99%        Bell Road Properties Ltd        Private Investor
1E Quadrant Dr                       Gracefield, Lower Hutt    Q4 2015   $3,550,000        $708         Vacant          Manchester Unity            Metco Engineering
15 Raiha St                             Elsdon, Porirua        Q1 2016   $2,900,000       $1,050        8.21%            Private Vendor                  Rica Ltd
92-96 Hutt Rd                      Kaiwharawhara, Wellington   Q2 2015   $2,475,000        $803         Vacant           Private Vendor              Private Investor
                                                                                                                     Brunswick St Properties
25-27 Brunswick St                    Central Lower Hutt       Q4 2015   $2,380,000       $1,916        7.13%                                        Private Investor
                                                                                                                          Ltd (Hodge)
6D Broken Hill Rd                       Elsdon, Porirua        Q2 2015   $2,040,000       $1,437        8.45%       Broken Hill Nominees Ltd       Tahi Investments Ltd
CHRISTCHURCH
Progressive Distribution Centre,
                                     Hornby, Christchurch      Q4 2015   $39,525,000    Undisclosed     6.97%              Virgo Group               Augusta Capital
146 Shands Rd
Glassworks Industrial Park,
                                     Halswell, Christchurch    Q4 2015   $38,900,000       $947       Undisclosed   Goodman Nominee Nz Ltd           Mainland Capital
652 Halswell Junction Rd
                                                                                                                                                  Belfast Business Park
Factory Rd                           Belfast, Christchurch     Q4 2015   $12,500,000    Undisclosed   Undisclosed       Silver Fern Farms
                                                                                                                                                          North
58 Hazeldean Rd                     Addington, Christchurch    Q1 2015   $9,700,000       ~$2,067     Undisclosed       Crane Distribution            Graeme Allen
12-14 Birmingham Dr                 Middleton, Christchurch    Q2 2015   $7,248,827       $1,256      Undisclosed    Main Trunk Holdings Ltd           Stuart Leck
                                                                                                                       Buchanan Property
51 Buchanans Rd                      Hei Hei, Christchurch     Q2 2016   $5,650,000        $520       Undisclosed                                Lesmau Investments Ltd
                                                                                                                           Syndicate
78 Treffers Rd                      Sockburn, Christchurch     Q1 2016   $5,155,000        $465         12.40%           78 Treffers Ltd             Private Investor

                                                                                   15
Sale          Capital
                                                                    Sale
 Address                                       Precinct                        Price          Value       Yield (%)           Vendor                    Purchaser
                                                                    Date
                                                                                ($)          ($/m²)
 HAMILTON
 6 MainSt Pl                               Te Rapa, Hamilton       Q1 2015   $4,000,000       $1,552       8.70%           Private Vendor            Private Investor
 13, 17 & 22 Norris Ave                    Te Rapa, Hamilton       Q3 2015   $3,550,000       $1,141       7.38%           Private Vendor            Private Investor
 220 Ellis St                              Frankton, Hamilton      Q1 2016   $3,550,000        $928        8.08%           Private Vendor            Private Investor
                                                                                                                                                  Auckland Based Private
 Air Liquide, Cnr Maui St & Tawn Pl        Te Rapa, Hamilton       Q1 2016   $2,680,000       $3,554       7.03%           Private Vendor
                                                                                                                                                         Investor
 Eastside Refrigeration, 139 Maui St       Pukete, Hamilton        Q2 2015   $2,450,000       $1,946       6.73%           Private Vendor             Private Investor

 TAURANGA/MOUNT MAUNGANUI

 3 Hynds Rd                                Gate Ta, Tauranga       Q1 2016   $4,950,000       ~$1,156      8.00%        Currie Family Trust           Private Investor
 66-68 Portside Dr                     Mount Maunganui, Tauranga   Q1 2016   $4,000,000       ~$1,503      6.70%         Ernluc Trustee Ltd           Private Investor
 2-6 Maru St                           Mount Maunganui, Tauranga   Q1 2016   $3,250,000      ~$1,718       6.10%        Leyland Holdings Ltd            KML Trust
 68 Glenlyon Ave                          Greerton, Tauranga       Q1 2016   $2,300,000       $1,136       6.52%      Promotre Corporation Ltd         Reed Family

 11 Newton St                          Mount Maunganui, Tauranga   Q2 2016   $1,410,000      ~$3,133       4.70%        Gavan Holdings Ltd       Sunnyvale Enterprises Ltd

 DUNEDIN
                                                                                                                       Southern Cross Forest
 34 Carncross St                          North Taieri, Mosgiel    Q1 2015   Confidential   Undisclosed    11.72%        Products Ltd (In             Private Investor
                                                                                                                           Receivership)

Source: Colliers International Research

                                                "The industrial sector is well
                                                  founded in its optimism."

                                                                                       16
A Selection of New Zealand Infrastructure Updates
                                                                   Estimated
 Infrastructure Project       Project Type          Status                           Project Information
                                                                   Completion
AUCKLAND
                                                                                     Upgrading SH20A will improve journey reliability for traffic to and from Auckland Airport. Safety
                                                                                     for all road users will be improved by separating motorway traffic from local traffic at the Kirkbride
SH20A to Airport             Road Improvements    Construction       Late 2016
                                                                                     road intersection. This will reduce the high number of crashes as well as provide a much safer
                                                                                     journey for pedestrians and cyclists crossing Kirkbride Rd.
                                                                   Operational by    Once complete, the Western Ring Route will be an alternative to Auckland’s State Highway 1, linking
The Western Ring Route       Road Improvements    Construction      2017 and fully   Manukau, Auckland, Waitakere and the North Shore, improving network resilience, travel time
                                                                  complete by 2021   reliability and bus shoulder lanes, and upgrading cycleway and pedestrian facilities.
                                                                                     The Southern Corridor Improvements Project covers the stretch of Southern Motorway (SH1) from
                               Infrastructure                                        the SH20/SH1 connection at Manukau down to Papakura in the south. The purpose of the project is
Auckland Southern Corridor                          Design           Late 2018
                                  Upgrade                                            to address existing bottlenecks at several locations along the Southern Motorway to provide a more
                                                                                     reliable trip for all road users.
Old Mangere Bridge               Bridge                                              Replacing the Old Mangere Bridge to provide the community with a safe, high quality walking and
                                                    Design             2018
replacement project            Replacement                                           cycling connection between the Onehunga and Mangere Bridge communities.
                                                                                     Auckland Transport, Auckland Council and the NZ Transport Agency are working together on plans
Transport for future urban        Study &
                                                  Investigation        2042          for future transport networks in the four new urban areas identified for development in Auckland
growth in Auckland              Investigation
                                                                                     over the next 30 years.
                                                                                     East West Connections is a programme that aims to identify and address transport issues in the area
                              Public Transport,
                                                                                     between Onehunga, Penrose, Mt Wellington, Mangere, Otahuhu and East Tamaki. The aim of the
East West Connections        Road Management,     Investigation         TBC
                                                                                     programme is to make sure people can easily move around their community, get to their jobs on time
                             Walking & Cycling
                                                                                     and businesses can continue to supply us with goods we want by providing an efficient network.
TAURANGA/MOUNT MAUNGANUI
                                                                                     Formerly known as the Maunganui Girven intersection (MGI) improvements project, the Baypark to
Baypark to Bayfair link
                             Road Improvements    Construction         2019          Bayfair link upgrade will provide improvements to the Te Maunga intersection to the Maunganui Rd/
upgrade
                                                                                     Girven Road intersection.
                                                                                     The Transport Agency is working with Tauranga City Council to improve Tauranga’s central
                                                                                     corridor. The Hairini Link project covers the stretch of road between the Maungatapu and Hairini
Hairini Link                 Road Improvements    Investigation         TBC
                                                                                     roundabouts (State Highway 29), Cameron Rd, including 15th Avenue, Turret Road and the Hairini
                                                                                     Bridge.

                                                                                      17
Estimated
  Infrastructure Project           Project Type          Status                             Project Information
                                                                        Completion
 WELLINGTON
                                                                                            The Wellington Northern Corridor improvements will ensure the SH1 route between Wellington
                                  Road Improvements,
 Wellington Northern Corridor                                                               Airport and north of Levin provides safe, efficient and reliable travel that communities and
                                  Road Maintenance,      Design           2017-2024
 (Including Transmission Gully)                                                             businesses can rely on to grow and prosper. The improvements are being constructed across eight
                                  Road Management
                                                                                            different sections.
                                                                                            The NZ Transport Agency and its council partners are investigating ways to make State Highway 58
 SH58 improvements                Road Improvements    Construction       Early 2018
                                                                                            (from Haywards Hill towards Pauatahanui) safer for everyone who uses it.
                                                                          Construction      This project will significantly alleviate congestion on the busiest part of the Wellington Northern
 Petone to Grenada Link Rd        Road Management      Investigation    is scheduled to     Corridor between Grenada and Wellington. It will play an important role in optimising the rest of the
                                                                         begin in 2019      Wellington Northern Corridor by helping the benefits of the other sections to be fully realised.
 CHRISTCHURCH
                                                                                            The Christchurch Rds of National Significance programme will provide critical access to and
                                   Roads of National                       On-going
 Christchurch Motorways                                Construction                         from the Christchurch central business district, Christchurch International Airport and the Port of
                                     Significance                        (2012-2019)
                                                                                            Lyttelton.
                                                                                            The Northern Corridor provides improved access to Lyttelton Port and the Christchurch CBD from
 Christchurch Northern             Roads of National
                                                         Design              2019           the north of Christchurch. The project is an extension of the Christchurch Northern Motorway that
 Arterial                            Significance
                                                                                            bypasses the suburbs of Belfast and Redwood to the east to connect with QEII Dr.
                                                                         Construction is
 Woodend Corridor                                                                           This project will increase the capacity of SH1 between Pineacres and Pegasus. Improve the road
                                  Road Improvements    Investigation   scheduled to begin
 Improvements                                                                               safety, accessibility and liveability of Woodend for residents.
                                                                         in 10-15 years
 DUNEDIN
 SH88 Dunedin to Port                                                    Construction is    Providing a safe alternative route for pedestrians and cyclists to State Highway 88 (SH88) between
 Chalmers walking & cycling       Walking & Cycling      Design        scheduled to begin   Dunedin and Port Chalmers, is the main reason for building this shared path along the western edge of
 path project                                                            in at least 2018   the Otago Harbour.
                                                                                            A proposal is being developed by the Transport Agency, to significantly improve cycle safety on the
 Dunedin one-way system
                                  Walking & Cycling      Design              TBC            one-way highway system through north and central Dunedin, by providing cycle lanes that physically
 separated cycle lanes
                                                                                            separate cyclists from traffic.

Source: NZTA, Colliers International Research
For further information visit: http://www.nzta.govt.nz/projects/

                                                                                             18
A Selection of New Zealand Industrial Developments
                                                                         Estimated        Owner /
Project Name/Address          Precinct        NLA (m²)     Status                                         Comments
                                                                         Completion      Developer
AUCKLAND

                                                            Under
63 McLaughlins Rd                Wiri           6,900                        Q1 2016      Euroclass       New development for Transport Investments Ltd
                                                         Construction
                                                            Under
246 Puhinui Rd                   Wiri           4,750                        Q1 2016       Private        Private warehouse development
                                                         Construction
                                                            Under                         Southpark       New design build facility for Star Products
117 Hugo Johnston Dr          Penrose           2,800                        Q1 2016
                                                         Construction                    Corporation      (The Aromatherapy Company)
                                                                                                          One of two warehouse and office developments
                                                                                          Goodman
31 Business Parade North     East Tamaki        6,950     Proposed           Q1 2016                      at Highbrook to be undertaken by Goodman on an
                                                                                        Property Trust
                                                                                                          uncommitted basis.
                                                                                                          One of two warehouse and office developments
                                                                                          Goodman
33 Business Parade North     East Tamaki        3,450     Proposed           Q1 2016                      to be undertaken by Goodman on an uncommitted
                                                                                        Property Trust
                                                                                                          basis.
                                                                                                          The CSR Viridian expansion will total over 18,000
HIghbrook Business Park,                                    Under                         Goodman
                             East Tamaki        7,793                        Q1 2016                      sqm once completed and will feature extensive yard
CSR Vridian Expansion                                    Construction                   Property Trust
                                                                                                          and hardstand areas.
The Landing Precinct       Airport Corridor    12,000     Proposed           Q1 2016   Auckland Airport   Purpose built facility for Coca-Cola Amatil
                                                                                                          Holden Ltd has also committed to a 2,002 sqm
Savill Link, Holden New                                                                   Goodman
                              Otahuhu           2,002     Proposed           Q2 2016                      warehouse expansion that utilises the full site area
Zealand                                                                                 Property Trust
                                                                                                          at its distribution centre in Savill Link, Otahuhu.
                                                            Under
296 Neilson St                Penrose          15,500                        Q2 2016     Wineworks        Bottling and wine storage facility for wineworks
                                                         Construction
                                                            Under                         Jomac           New Design Builod facility for the tap wear
41 Jomac Pl                   Avondale          5,500                        Q2 2016
                                                         Construction                   Construction      manufacturer Methven
                                                            Under                         Jomac
27 Jomac Pl                   Avondale          2,800                        Q3 2016                      New Design Build facility for Thorn Lighting
                                                         Construction                   Construction
M20 Business Park,Orora                                                                   Goodman         Manufacturng and warehousing facility for Orora
                            Manukau/Wiri       11,324     Proposed           Q3 2016
Development                                                                             Property Trust    Packaging
M20 Business Park, Spec                                                                   Goodman
                            Manukau/Wiri        3,300     Proposed           Q3 2016                      Spec development adjacent to Orora
Development                                                                             Property Trust
                                                            Under
221 Ihumatao Rd            Airport Corridor    53,610                        Q4 2016   Auckland Airport   New Sistema factory. Commenced in Q3 2015
                                                         Construction
                                                            Under
78 Cryers Rd                 East Tamaki        7,667                        Q4 2016       Private        Owner occupier development for Transnet
                                                         Construction
                                                            Under
100 Cryers Rd                East Tamaki        7,500                        Q4 2016    Aintree Group     New warehouse for SIMX
                                                         Construction
                                                                                       Stride Property    Warehouse A & B comprising 5,050 sqm and 2,180
1 O'Rorke Rd                  Penrose           7,230     Proposed           Q4 2016
                                                                                             Ltd          sqm. Construction mid 2016

                                                                        19
Estimated          Owner /
 Project Name/Address              Precinct        NLA (m²)     Status                                          Comments
                                                                              Completion        Developer
 WELLINGTON

 Placemakers Porirua, Broken
                                 Elsdon, Porirua     6,862     Completed          Q1 2016     Mike McCombie     Prenail Truss and Frame plant
 Hill Rd
 Placemakers Seaview,           Seaview, Lower                                                   Wallace
                                                     6,740    Commenced           Q3 2016                       Retail and Trade Depot
 49 Seaview Rd                       Hutt                                                      Developments
 CHRISTCHURCH

 Fletcher Easy Steel, Hornby                                   Nearing
                                     Hornby         12,000                        Q3 2016     Calder Stewart    Design build for Fletcher Easy Steel
 Quadrant Development                                         Completion
 NZ Trucks/AB Equipment,
                                                                 Under                                          Design build for NZ Trucks/AB Equipment (Hellaby
 Hornby Quadrant                     Hornby         ~6,500                        Q1 2017     Calder Stewart
                                                              Construction                                      Holdings)
 Development
                                                                                               Christchurch
                                  Christchurch                   Under
 Freightways, Dakota Park                           12,500                        Q4 2016      International    Design build for Freightways
                                    Airport                   Construction
                                                                                                  Airport
 HAMILTON

                                                                 Under
 Arthur Porter Dr                   Hamilton         7,600                        Q4 2016      Porter Group     Porter Parts Building - Stage 2
                                                              Construction
 Arthur Porter Dr                   Hamilton         4,600     Proposed           Q4 2016      Porter Group     Porters Farm Workshop - Stages 3-5
 Bunnings, 11 Quentin Dr         Hamilton Lake      13,300     Proposed           Q4 2016      Bunnings Ltd     Bunnings warehouse design build
 DUNEDIN

                                                                                                 Chalmers       Chep has relocated to a new $4m office and
 Sturdee St                     Central Dunedin      2,000     Completed           2015
                                                                                               Properties Ltd   warehouse development
 Dukes Rd                         North Taieri       1,051     Completed          Q1 2016       Farmlands       New build facility for Farmlands store
                                                                                                                Lion Nathan is constructing a $6m facility for
 Anzac Ave                      Central Dunedin    Unknown     Completed          Q2 2016       Lion Nathan
                                                                                                                Emersons
                                                                                                                $9.45m warehouse and office complex for Steel
                                                                                                 Chalmers
 197 Fryatt St                  Central Dunedin      4,650    Construction        Q4 2016                       & Tube to be constructed on the former Northern
                                                                                               Properties Ltd
                                                                                                                Southland Transport site.

Source: Colliers International Research

Outlook
Access to suitable levels of stock remains a vital ingredient for                 but not for long. Vacant land is now being absorbed at a faster rate
any expanding market. For the industrial sector, the recurring                    than experienced over recent years — another prominent trend
commentary surrounding the lack of stock stands out across the                    throughout the country. This will lead to higher costs for new builds
country with many main markets struggling to keep up due to                       and rents, albeit some developers may be able to offset the higher
demand outweighing supply. This is a trend likely to continue.                    required rental returns for feasibility calculations, given the higher
                                                                                  cap rates being achieved.
For some time now, the majority of the focus has been on high
quality modern premises which allows tenants greater efficiency                   Investors are ‘yield-hungry’ and low debt costs are driving market
and more productivity while providing owners with less capital                    sentiment. The key characteristic at the moment is that the industrial
expenditure, seismic strengthening or other major maintenance                     sector is enjoying a positive period of economic growth. This is
requirements. However, given the strong demand environment,                       supported by the stability in the manufacturing sector’s number
there is evidence now that demand is overflowing and spreading                    of businesses and employment expectations as well as the rising
into the secondary sector as tenants and investors have                           importance and strength of the construction and transport, postal
diminishing choices.                                                              and storage sectors.

This market dynamic between demand and supply is leading                          Because of these features, the current medium-term outlook for
to another strong round of development activity. However, not                     the industrial sector remains robust. Yields are continuing to reach
all locations have land available for suitable (and profitable)                   record lows. Although strong bidding and more tenants moving
development. The common reasons behind this are: tight                            into secondary quality properties may be considered to be a signal
ownership, increasing land values or geographical constraints                     the market is nearing its cyclical peak, we expect current positive
like neighbouring hills or harbours. In locations that do have                    conditions will continue. Until we see greater signs of profit-taking
sizeable tracts of ‘ready-to-go’ land like Ruakura in Hamilton or                 and euphoric market trading, the industrial sector is well-founded
Tauranga’s Tauriko Businesss Park, the pressure has been reduced,                 in its optimism.

                                                                             20
For more information contact:                                                  Colliers International research and consulting
Alan McMahon                                                                   offers a range of commercial and residential
National Director | Research & Consulting                                      property solutions:
Chris Dibble                                                                   • Property Investment strategies
Director | Research & Consulting                                               • Demand and Supply Studies
Chris Farhi                                                                    • Market Analysis and Forecasts
Director | Strategic Consulting                                                • Feasibility Analysis
                                                                               • Catchment Analysis
Elena Christodoulou                                                            • Lease Audit and Benchmarking
Research Analyst                                                               • Site Options Analysis
Emily Duncan                                                                   • Corporate Real Estate Strategy
Research Analyst                                                               • Financial Analysis
                                                                               • Business Cases
Aimee Simpson
Research Co-ordinator

Colliers International
Level 27, SAP Tower
151 Queen St
Auckland
+64 9 358 1888

Whilst all care has been taken to provide reasonably accurate information within this report, Colliers International cannot guarantee
the validity of all data and information utilised in preparing this research. Accordingly Colliers International New Zealand limited, do
not make any representation of warranty, expressed or implied, as to the accuracy or completeness of the content contained herein
and no legal liability is to be assumed or implied with respect thereto.
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                                                                                            21
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