The latest Industrial and Office Occupancy Surveys conducted by CBRE Research and NAI Harcourts to the end of December 2022, provides insight into the local economy and future trends.
Industrial
Monitored industrial building stock in Hamilton reached 2,058,000sqm, following 56,700sqm of new supply reaching completion in the twelve months to December 2022.
Overall industrial vacancy increased from 0.9% at the end of 2021 to 1.2% in December 2022, representing less than 25,000sqm of physically vacant and available space, with almost two thirds of this vacant stock located in Frankton.
The growth in Hamilton’s industrial sector and continued low vacancy (now four years running below 2% vacancy) has seen pressure on rental growth with new building warehouse rentals growing by some 10% to 15%. Part of the increase is due to higher land costs, materials and construction cost increases and in a number of cases more than one party offering to lease the same space.
The most noticeable change in vacancy was recorded in Te Rapa North where vacancy increased from 0.2% to 1.0% in the twelve months to December 2022. The single biggest contributor to this increase was the completion of a large warehouse at 12-16 Earthmover Crescent, half of which remained untenanted at the end of 2022.
Although the number of available units in Frankton fell from 18 to 12, vacancy grew slightly to 2.3%, as a result of several larger facilities becoming available.
Vacancy remained stable at 1.5% at the Airport Precinct, representing only 3 available units.
The most significant new completion in 2022 was the 7,050sqm new facility at 12-16 Earthmover Crescent in Te Rapa North, half occupied by NZ Post. Overall, Te Rapa North experienced an addition of almost 34,000sqm of new stock.
2022 also saw the completion of a number of new multi-unit developments situated along Arthur Porter Drive, Earthmover Crescent and Maui Street in Te Rapa North.
Despite the economic headwinds, the Hamilton industrial market continued to experience strong developer and occupier activity during 2022.
Office
Overall office vacancy in the Hamilton CBD has fallen 0.3% to 8.2% in the six months to December 2022, with the amount of vacant space remaining essentially stable and the reduction being driven by the largely occupied additional buildings increasing the amount of occupied stock.
After holding relatively stable over the past 18 months at 3.1%, Grade A vacancy has since seen a decrease of 0.3% to 2.8% following the full occupation of the NZI building at 225 Collingwood Street.
Grade B also saw a decline in vacancy, falling from 6.3% to 5.7%. There have only been four new vacancies, ranging from just over 160sqm at Vero House to 250sqm at Anglesea Imaging Centre. Previously vacant space at 54 Bryce Street has since been occupied by Spec Savers Audiology.
Grades C – E experienced an overall increase during the second half of 2022, which now sits at in excess of 10%, with Grade E alone, now 15.9%
Although the latest survey results show a relatively stable office occupier market in the higher quality stock (Grades A and B) and more activity in lower grades, this is more a reflection of tight availability in quality stock, than a lack of demand for new and efficient workplaces by occupiers.
Flight to quality remains a strong theme, as businesses aim to create workplace environments that help not only to attract and retain talent, but to maintain and improve employee morale and company culture. While hybrid working and more employee flexibility is here to stay, it doesn’t seem to be a major issue in the Waikato where commuting to and from the office is perhaps less stressful,
Overall
Undoubtedly, Hamilton is going through a major transformation period with a plethora of developments under construction and in the pipeline, in a wide range of sectors from logistics, manufacturing, infrastructure to office, arts and recreation. We believe that occupier demand for high-quality office accommodation and industrial space will remain strong (as evidenced by some large precommitments in under construction developments), increasingly including national and multinational businesses evaluating their growth opportunities outside of Auckland and government from Wellington.
Hamilton is quickly becoming the focal point of the golden triangle economic area, which bodes well for the future of the Hamilton industrial and office markets.
