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Wellington Industrial market update – Q2 2023

See below a summary of the biggest trends in Wellington’s industrial market, plus an outlook on the next 12 months.

Shortage of space leading to off-market leasing

Historic low levels of vacancies, combined with strong demand, is leading to more deals occurring off-market.

Businesses looking to 3PL for solutions

Shortage of warehousing is driving businesses to outsource logistics to 3PL providers with existing warehouse capacity. Foreseeable that 3PL providers will also hit similar warehouse capacity issues in the future.

Greenfield industrial land in short supply

Persistent shortages of industrial land are causing would-be owner-occupiers to extend their search perimeters out to the fringe of the region or even into other regions. Transmission Gully has helped decrease travel times across the region.

Outlook for the next 12 months

Rents on the rise

Low vacancies and strong competition for space are likely to continue to fuel growth in rents. The risk of a recession during 2023 may lead to slower rates of growth compared to the past 24 months.

Yields stabilising at higher levels

Rising interest rates have led to a softening of yields across most markets. Signals that inflation and long-term interest rates are peaking mean yields are likely to stabilise at higher levels. Lower number of sales transactions means there is less evidence available to showcase this trend.

Micro-units hang in the balance

A wave of newly developed sub-100sqm micro-units is coming to market. Currently sufficient tenant demand exists to absorb the new units, but there is a risk of over-supply as more developments complete.

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