The Golden Triangle

The Golden Triangle

Total Property - Issue 8 2019

The ‘Golden Triangle’ encompassing Auckland, Waikato and the Bay of Plenty is the nation’s economic engine room and is dominating infrastructure spending, and this is driving strong commercial and industrial property fundamentals, according to new industry analysis.

The Bayleys Research report The Golden Triangle: logistics 2019 notes that the area is home to more than half of New Zealand’s population and generates the majority of our gross domestic product.

It has enjoyed rapid business and employment growth, which at over 24 percent between 2010 and 2018 far outstrips the 17 percent achieved across the rest of the country.

“Recent years have seen high levels of business growth and job creation within the Golden Triangle and this has in turn fuelled demand for workspace and driven a surge in development activity,” says Ryan Johnson, Bayleys’ national commercial and industrial director.

“Demand for industrial property, in particular, is underpinned by the presence of the country’s two busiest sea ports — Tauranga and Auckland — and largest international gateway, Auckland airport.”

The pivotal role of the triangle, and its strong growth, have made it a major focus for infrastructure developments which, in turn, are boosting property fundamentals, says Johnson.

Bayleys Research manager Ian Little says New Zealand Transport Agency (NZTA) figures show that 56 per cent of national freight movements pass through the Golden Triangle, while a third of exports go through the Port of Tauranga.

“It’s not surprising that, of the $129 billion earmarked for infrastructure projects over the next decade, about $100 billion is to be spent on projects within the Golden Triangle, including $55 billion on land transport.”

Little says heightened demand for real estate has driven a surge in development, with commercial and industrial building consents totalling 1.2 million square metres in the year to April, equating to 39 per cent of the national total.

Around two-thirds of this was industrial development, with 776,000 square metres, nearly double the 395,000 square metres recorded two years earlier.

However, Johnson says demand is still outpacing supply.

In Auckland, a lack of development land and rising land costs have forced development activity outwards. New industrial precincts have sprung up on the fringes, but even here industrial-zoned land can be quickly exhausted as experienced in Pokeno. The report identifies Drury South as the next focus of industrial expansion in southern Auckland.

Johnson says real estate opportunities are also opening up for other centres, particularly Hamilton. “Located centrally between the major exporting ports of Auckland and Tauranga, and benefiting from significantly upgraded land-transport links, Hamilton is positioning itself as a strategic logistics and distribution hub.

“New inland ports at Ruakura and Horotiu illustrate the city’s growing appeal, and will help address some of the shortfall in industrial and logistics space.”

As these hubs expand, they will bring logistical and supply-chain benefits to industrial occupants, and lower freight costs.

Notwithstanding these developments, demand for space is driving historically-low vacancy rates.

According to Bayleys’ latest surveys, the combined industrial vacancy rate across Auckland, Hamilton and Tauranga was just 1.8 percent. Vacancy has fallen from a year earlier in all three cities – from 3.3 percent to 1.7 percent in Auckland; from 2.8 percent to 2.3 percent in Hamilton; and from 4.4 percent to 2.4 percent in Tauranga.

PROJECTS SUPPORTING GROWTH

Waikato Expressway

Due for completion in 2020, this $2 billion project will provide 100 kilometres of four-lane median-divided highway from south of Cambridge to the Bombay Hills, where it will link with Auckland’s Southern Motorway.

The NZTA touts it as a key strategic transport corridor connecting Auckland to the Waikato and Bay of Plenty, which will boost growth and productivity through more efficient movement of people and freight.

Western Ring Road

Completed with the opening of the Waterview tunnel in 2017, this alternative north-south motorway route through Auckland has enabled better connections between new industrial precincts in the north and northwest and Auckland’s international airport and industrial precincts in south Auckland.

Southern Corridor improvements

This $268 million project covers the Southern Motorway from its connection with State Highway 20 at Manukau in the north, to Papakura in the south. It will add lanes in both directions and includes an upgraded Takanini interchange.

Bay of Plenty

Major roading improvements in Tauranga have included:

• the $455 million Tauranga Eastern Link (TEL), a 23 kilometre, four-lane motorway from Te Maunga junction to Paengaroa;

• the $45 million Maungatapu underpass between Welcome Bay and Turret Road;

• The $102 million Baypark to Bayfair link upgrade, which will add two flyovers on State Highway 2, improving the link to the Port of Tauranga and connecting to the TEL, completing the Bay of Plenty’s ‘Eastern Corridor’.


Read more market insights from Total Property

Subscribe to receive the latest commercial news and insights from Bayleys Total Property