Demand underpins intense property activity
Hamilton is the focus of intense commercial property activity in the office and retail sectors as evolving demand underpins extensive refurbishment activity and a development pipeline.
A survey of Hamilton office and retail occupiers, carried out by CBRE Research and NAI Harcourts in December 2019, is the latest in the biannual series conducted jointly by the two organisations.
It revealed office vacancy dropped by 3.3 per cent over the six months, to 6.5 per cent in December 2019 (a net 7588sqm decrease in vacant space) despite total office accommodation in the Hamilton CBD increasing significantly in the same period; up by 10,167sqm to
262,533sqm.
Healthy demand underpinned extensive refurbishment activity and a development pipeline.
‘‘The most significant of a number of sizeable new development projects in the pipeline include the 12,000 sqm Tristram Precinct, 23,000sqm Union Square, Tainui’s launch of its
$50 million-plus office complex for ACC, and Waikato Innovation Park,’’ the report said. ‘‘The outlook for 2020 and beyond appears extremely positive.’’
Hamilton was becoming a national focus for office activity, said Gergely Gaspardy, associate director, research, for CBRE NZ. ‘‘High quality office space continues to be in demand, and there are no new vacancies in Grade A. Developers are responding to strong demand through extensive refurbishments of lower-quality buildings as well as through a number of large-scale new development projects.
‘‘To a large extent the public sector is driving this intense office activity, mainly through a desire to occupy space more efficiently and provide betterquality accommodation for staff. Along with offering highly competitive office rental rates in comparison to Wellington and Auckland, it is fuelled also by population growth, better infrastructure and the growing relevance of the so-called Golden Triangle economic area of Auckland, Hamilton and Tauranga.’’
From a retail perspective, the research showed demand for prime retail space was relatively high, and secondary space vacancy was increasingly challenging as its popularity declined.
Overall, the CBD retail vacancy rate dropped from 8.4 per cent to 8.2 per cent, with vacant space dropping from 6720sqm in June 2019 to 6470sqm in December 2019. The amount of stock under refurbishment had also decreased significantly as the space formerly occupied by Farmers had been converted to offices and clinical space for Waikato District Health Board.
Prime retail saw a 4.6 per cent drop in vacancy, moving down to 7.7 per cent in December 2019 from 12.3 per cent in June 2019.
There had been two sizeable take-ups of vacant space in this grade, according to the survey. One of these was Go NZ Variety, which leased a 1450sqm space at
62 Bryce St that had been vacant for an extended period. The second largest take-up was located at 427 Victoria Street, where Goldsmith Gallery had leased
218sqm of retail space. Secondary grade experienced a large increase in vacancy over the last six months, moving from 9.8 per cent to 13.6 per cent, the highest level seen in this grade. There were multiple sizeable new vacancies, the largest Yakedas Party & Gifts, which vacated 290sqm of space at 10 Garden Place.
While there had been no new construction activity recorded in the CBD since June 2019, a number of refurbishments had begun, including redevelopment seismic strengthening activity on both corners of Garden Pl and Victoria St.
‘‘Since June 2019, we have witnessed a decline in demand for secondary-grade retail space, as well as the growth in demand for prime retail, particularly for smaller tenancies,’’ said NAI managing director commercial sales and leasing, Mike Neale.
‘‘We know that with increasing demand and higher competition in the CBD retail market, tenants are now moving towards quality spaces with higher amenities that are located in areas with higher foot traffic. Larger retail spaces have on the whole remained more difficult to fill and landlords are becoming proactive in refurbishing and splitting these spaces to become more attractive to a greater potential tenant pool.
‘‘The outlook for 2020 is positive. With an increasing variety of retail offerings, food and beverages, along with services and personal retailing. Demand for prime retail space is strong, and options are limited due to the decline in vacancy. Occupiers are jumping on to prime-grade space when it becomes available.’’