Knight Frank - Property View

FIGURE 7

Market analysis

Industrial Yields Continue

to Contract

Sale prices are continuing to increase

at a faster rate than rents, causing

yields to contract. Prime industrial

yields have fallen to record lows with

Knight Frank seeing yield continuing to

fall with increasing numbers of sales

transacting at sub 6%. An example is a

building that Knight Frank has recently

sold at 66 Cryers Road, East Tamaki

which sold for $11,333,000 in May 2016

for 5.90% which illustrates the demand

for modern-high quality investments

and the contraction of yields.

The shortage of stock has seen owner

occupiers compete with investors

in order to secure premises which

is further driving up sale prices and

contracting yields. Over the past 12

months the average prime industrial

yield sat just under 6.40%. Yields for

prime industrial properties have fallen

by 25 - 50 basis points over the past 12

KFNZ Ltd 2016 - KFNZ Ltd t/a Knight Frank has published this report for general information only and the contents are not to be relied upon in any way. Although high standards have been used in

the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank for any loss or damage resultant

from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties

or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank to the form and content within which it appears.

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FIGURE 4

South Auckland – prime industrial $sqm rates

FIGURE 5

Average A-grade industrial yield – South Auckland

FIGURE 6

Industrial sales & investment yields

In Conclusion

The overall outlook on the New Zealand economy is positive

in many respects and prospects are looking good for this to

continue into 2017. Record low interest rates and a definitive

shortage in supply of quality stock and available land, will

continue to contract yields and place upwards pressure on

rentals. Demand for prime offerings will remain positive with

overflow benefits being realised by the secondary market.

We expect the market to remain in positive territory for the

short to medium-term, although indications are pointing

towards the market nearing its cyclical peak.

Market Predictions

·· Strong demand suggests the industrial

market will remain buoyant into 2017

·· Increasing pressure on B-Grade

industrial rents and yields from Prime

demand overflow

·· Yields will continue to contract

throughout 2016

·· Increased demand from owner occupiers

as low cost of funds make purchasing

more affordable than renting

·· As increased supply becomes available

in 2017 rental inflationary pressure

will slow

2013

2014

2015

2016

2017

(F)

$50

$100

$150

$200

$250

$300

2014

2013

2012

2011

2010

2015

2016

2017

(F)

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

Address

Suburb

Sale

Price

Floor

Area

Yield

Sale

Date

Prime/

Secondary

Lorien Pl

East Tamaki

$1,100,000 600

Vacant

Jun-16 Secondary

Lorien Pl

Manukau

$2,500,000 1,390

6.00% Nov-15 Secondary

Hill St

Onehunga

$4,471,000 1,044 Undisclosed Jul-16 Secondary

Stonedon Dr

East Tamaki

$4,850,000 3,480

Vacant

Jul-15

Prime

Harbour Ridge Dr Wiri

$8,200,000 2,675

5.88% Aug-15

Prime

Neilson St

Onehunga $8,833,333 6,309

7.49% Jun-15

Prime

Echelon Pl

East Tamaki

$8,500,000 4,153

Vacant

May-16

Prime

Cryers Rd

East Tamaki

$11,333,000 6,000

5.9% May-16

Prime

Carbine Rd

Mt Wellington $11,638,000 5,527

6.00% Sep-15 Secondary

Jarvis Way

East Tamaki

$13,000,000 1,735

5.50% Oct-15

Prime

Church St

Penrose

$16,500,000 8,388

6.85% Feb-16 Secondary

Warehouse

Office

Market Yield

Land Value

Prime

Secondary

Prime

Secondary

Prime

Secondary

< 1 ha

> 1 ha

Penrose/Onehunga $115-$130

$85-$105

$200-$250

$175-1$95 5.50%-6.25% 6.75%-7.50% $550-$600 $450-$550

East Tamaki

$105-$120

$85-$100

$190-$240

$160-$185 5.75%-6.50% 7.00%-7.75% $500-$600 $400-$450

Mount Wellington

$115-$130

$85-$106

$200-$250

$175-$195 5.50%-6.25% 6.75%-7.50% $550-$600 $450-$550

Manukau/Wiri

$105-$120

$85-$95

$180-$220

$155-$175 5.75%-6.50% 7.00%-7.75% $400-$525 $350-$450

Airport

$105-$120

$85-1$00

$190-$220 $160-$185 5.75%-6.50% 7.25%-8.00% $400-$525 $400-$450

Avondale

$105-$120

$75-$95

$200-$225 $130-$170 6.00%-6.75% 6.75%-8.00% $500-$600 $400-$500

months with typical yields ranging from

5.50% - 6.50% for Prime offerings.

Low interest rates and the strength

of the growing economy continue to

motivate investors and syndicators

who are chasing a competitive yield.

The shortage of properties being

marketed for sale has driven a highly

competitive market place and firming

of yields. Knight Frank is forecasting

that this trend will remain consistent

through 2016 with further contraction

of yields and the average prime

industrial yield to fall below 6%.

Office

Warehouse

AUCKLAND

PROPERTY VIEW 2016

KNIGHTFRANK.CO.NZ