With positive long-term sector fundamentals and ongoing infrastructure development supporting future expansion, investors, developers, owner-occupiers and tenant businesses are scoping opportunities to consolidate a strong workable position in the industrial market, says Bayleys.
In the firm’s latest Total Property portfolio, Bayleys’ national director industrial and logistics Scott Campbell says the industrial sector navigated the last real estate cycle well, and overall the market remains relatively tight despite some residual uncertainty from occupiers over required real estate footprint.
“There’s high demand for A-grade space, and a significant uptick in sublease space in some regions is giving occupiers more choice while keeping a lid on rental escalations for now.
“Irrespective of recent downward shifts in interest rates, business confidence remains somewhat tenuous, with rental budgets under scrutiny and in some cases, out of step with landlord expectations.”
On the investment side, Campbell says yields are stabilising at higher levels, and while lower interest rates should bring yields down, there will not be huge drops as lingering economic, employment and growth concerns still prevail, despite the central bank’s more dovish forecasts.
Bayleys’ global real estate partner Knight Frank’s Asia-Pacific H2 2024 Logistics Highlights report outlines key trends in the wider region’s logistics sector and emphasises that occupiers are continuing to plan for supply chain contingencies, optimising the use of technology in their operations, and prioritising cost management.
Campbell explains that this is driving demand for greater sustainability and automation across the industrial sector, demonstrated by the ongoing flight to quality with preference for modern, well-performing buildings.
“The automation story is quickly gaining momentum, with early adopters of new technologies having a market advantage. Advanced automated storage and retrieval systems (ASRS) are improving efficiency, inventory control, and safety in manufacturing, distribution, and retail-driven logistics businesses.
“It’s also escalated the need for purpose-built world-class industrial buildings for some of the country’s largest occupiers, and the development sector has responded.”
Quoted in Total Property, Ben Stewart, associate director property for property and construction business Calder Stewart, says the firm is New Zealand’s largest developer/builders of industrial property on a square metre basis and owns the country’s biggest industrial-zoned greenfield land portfolio.
Sustainability outcomes are at the core of delivering best-in-class new development stock and Calder Stewart sees energy security as an under-considered risk in the industrial sector.
“We’re challenging the status quo by including solar as standard, paid for and operated by Calder Stewart Energy,” says Stewart.
“Over time we see our greenfield developments transitioning into ‘energy precincts’, where we establish generation at the same time as new consumption is created and create underlying infrastructure to enable aggregation and trading between occupiers within the same precinct.”
With the industrial sector becoming more sophisticated given demand for ASRS-enabled warehousing, Stewart says business and site consolidation is occurring around the country.
“We’ve seen a focus of consolidation for several of our customers, often vacating a number of sites into one efficient, purpose-built facility to maximise business outcomes, and we will see more of this happening, particularly given the cost and limited land availability in Auckland.
“Location is important because higher automation and racking requirements require geotechnically solid ground conditions, strong concrete foundations, and availability of power.”
Calder Stewart acquired 15ha for forward projects in Drury South on Auckland's southern border. It purchased several ‘super lots’ and has adjusted boundaries to suit occupier’s requirements, and is currently progressing warehousing and distribution centres for NZ Safety Blackwoods and Briscoes – two companies that have strategised for long-term operational business needs.
Bayleys’ Total Property article on the industrial sector also quotes Tom Fitz-Walter, global executive director of supply chain at TMX Transform. The end-to-end global supply chain consultancy helped NZ Post integrate automation, technology, and sustainability into its 30,000sqm Auckland Processing Centre in Wiri, South Auckland – the country's largest parcel processing facility.
Fitz-Walter says while New Zealand does not have the population or scale of many of our international counterparts, this country faces the same challenges and operating circumstances as larger territories regarding supply chains.
“Customer expectations are the same regardless of territory. A retailer in New Zealand must meet the same demands as a retailer in the U.S. or Europe, such as same day delivery or ease and cost of returns (reverse logistics).
“Infrastructure needs to become more sophisticated so organisations can deliver on customer experience and to anticipate and meet future demand. Speed, growth, and flexibility are what is needed and valued across the board, and key to this is strategic planning.
Prioritising the areas of improvement or transformation will then lead to solutions, which range from minor to large scale. Sometimes a solution involves automation, but only if it is fit-for-purpose.
In terms of future-proofing supply chain automation solutions, Fitz-Walter says there may be the risk of not doing enough, so long-term strategic planning is invaluable.
“Simulation technology can test and generate the outcomes and impacts of different scenarios automatically in response to many different inputs. That includes testing the introduction, expansion, or implementation of automation into a facility or into any part of a supply chain operation.
“It gives business owners and executives more confidence in their decisions since they’ve been able to test the solution beforehand. Automation is often about reducing cost, increasing speed and efficiency, and redirecting workforce labour to higher-skilled and higher-value work.
“Simulation can test the impact of these changes in a warehouse – for example, what automating a process will do to the pick rate or cartons dispatched per hour, but simulation can apply to any part of the end-to-end supply chain.”
This article was originally published by OneRoof on March 15 2025.