A combination of major road improvements currently underway, continued population and business growth to the north and the long term development potential of Tainui’s 600+ha Ruakura site (including the 80ha inland port and freight hub) to the east will act as the primary growth catalysts for Hamilton over the medium to long term.
Not surprisingly these developments are forcing a major rethink by council of its long term vision for the CBD. What are emerging are plans for a more compact, rejuvenated CBD with a stronger connection to the river. Council believes that these proposed initiatives will both attract and retain more businesses and workers within the CBD as an increasing number of retail and commercial opportunities emerge outside the city core.
Following a spike in large scale new office development in 2012/2013, levels of new construction have eased with the emphasis having moved to speculative refurbishment and redevelopment aimed at upgrading older existing office stock. This has been driven by increasing demand for smaller, higher quality accommodation.
Hamilton’s CBD office market is a tale of two halves – tight vacancies amongst quality A grade properties, versus ongoing weakness and higher vacancies amongst poorer secondary space. Occupier activity has been subdued over the past 12 months with rents flat across the quality grades. Development activity has largely been limited to speculative refurbishment and redevelopment work amongst older grade office buildings. Examples include: 103 Tristram Ave, a 720m²2 property which was refurbished in the second half of 2014 by Daniel Watkins and attracted a number of smaller tenants in the 100 to 150m2² range, and Matt Starks successful refurbishments at 408 Anglsea Street and 554 Victoria Street. More of these smaller refurbishment projects are likely over 2015.
Te Rapa remains Hamilton’s other major office precinct and is occupied by a small number of prime tenants including Ecolab and ACC. With much of the city’s population growth centred in the fast growing northern suburbs of Rototuna North and Flagstaff, the push-pull of office occupiers between the CBD and Te Rapa is likely to continue despite councils District Plan encouraging CBD office development over other areas.
The Bayleys Research industrial vacancy survey for Hamilton shows that conditions remain tight across all the major traditional industrial areas. The overall Hamilton vacancy stands at a low 5.1% for March 2015 with Te Rapa to the North recording the lowest vacancy at 1.4% and Avalon the highest at 8.5%. Owner occupiers dominate the industrial market and there is currently a real shortage of smaller industrial properties available for occupation. The low vacancy rate recorded in Te Rapa reflects the fact that a majority of development is modern and has been developed on a design build basis. Frankton, a far more established precinct, houses older style premises. These however remain popular with small engineering and service companies with agency reports suggesting that vacancy has been trending down over the last two years.
The investment market remains very tight and when properties are presented for sale competition is fierce with owner occupiers having become particularly active in recent months. This competition is reflected in industrial property yields which have firmed by around 100 to 150 basis points over the last year. The shortage of smaller investment grade stock has lead to more owner occupiers buying land and developing their own premises and spreading the costs over a 10 to 15 year window. Building consents for new storage and factory facilities are up 138% over the past year.
One of Hamilton’s largest landholders is the commercial development arm of Waikato-Tainui, Tainui Group Holdings (TGH), which together with Chedworth Properties sought and obtained approval last year from a board of inquiry, appointed by the Environmental Protection Authority, to allow large scale employment and residential development on its 600+ha Ruakura land. Following that ruling Tainui has recently announced it will lodge resource consent applications for the first stage of its $3.3bn Ruakura Inland Freight Hub. This will be for light industrial uses on around 20ha of land, the aim being to follow a similar development style to that of the Highbrook Business Park in East Tamaki. The freight hub will be designed to take advantage of the rail line connecting Hamilton to the ports of Auckland and Tauranga which runs through the site. The Waikato Expressways eastern spine will also run down the site’s boundary when completed in 2019 and provide easy access for road freight. Ultimately the long term (50+ year) development of this huge site into an inland port, industrial park and other uses such as retail and residential will require close co-operation between council and Tainui to ensure the best outcomes for Hamilton as a whole are achieved.
The success of The Base shopping precinct in Te Awa in attracting both retailers and shoppers is continuing to put pressure on CBD retailing. Both primary and secondary shopping strips within the CBD are coming under significant pressure with high levels of vacancies and softer pedestrian traffic. There is no quick fix to these challenges and council plans to rejuvenate the CBD will take time to generate results. Ultimately a more vibrant and rejuvenated CBD will attract more businesses and workers and lead to increased retail spend. Encouragingly retail activity within the major CBD mall, Centre Place, is performing well. The $36m upgrade in 2013 has consolidated its position as the primary retail destination in the central city.
Reflecting the mixed conditions, prime retail rents have generally remained flat over the past year while those in secondary locations suffering higher vacancies have come under further downward pressure. Investment activity has been subdued to date, however this is about to change with two major Hamilton shopping centre owners recently announcing plans to sell down their holdings. Kiwi Property Group has put its redeveloped Centre Place South complex on the market. The recently redeveloped 10,900m2² centre is anchored by Farmers and 27 separate retailers. Scentre Group has also placed Westfield Chartwell on the market. The centre has 29,000m2 ² of retail space and is occupied by 129 tenants.
The Waikato region’s population is projected to increase 17% from its current 424,600 to 496,600 in 2033 based on Statistics NZ numbers. Hamilton is expected to record even stronger growth at 29% with the city’s population moving from 148,000 to 191,000 in 2033.
Much of this population growth is currently occurring to the north of the city in areas such as Rototuna North where attractive house and land packages are drawing more families. Proximity to employment zones such as Te Rapa Park and newer retail centres such as The Base in Te Awa will help underpin growth to the north of the city. Equally council’s plan to create a more compact and rejuvenated CBD with increased amenities and better links to the river should attract more businesses and workers to the CBD. This will underpin retail spending and support further retail development in Hamilton.
Reshaping the CBD
The council is working on delivering a written plan for Hamilton’s Central City (as defined by the proposed District Plan) that identifies the outcomes, opportunities and projects required to transform the central city into a strong commercial centre, with residential living.
The new Hamilton Plan with its particular focus on an active, strong commercial central city and the connection to the river and residential living is starting. Links to the river have been particularly under utilised in the past and are now being addressed under the New District Plan which provides for a greater focus on riverside development and amenities.
Many of the plans are designed to ensure a reinvigorated and vibrant CBD and council is working towards this goal with key stakeholders. The central city transformation plan is to be released shortly.
The Council is supported in its vision by the Hamilton Central Business Association which is very active in promoting the benefits and attractions of the CBD.
The CBD is currently home to a number of high profile businesses including Deloittes, KPMG, PwC, Craig investment Partners and Fonterra as well as housing 20,000 students as part of the Wintec campus, Waikato’s largest tertiary Polytechnic.
In summary, Hamilton holds many attractions for both investors, business operators and as a place to live. The building blocks for the city’s future growth are certainly in place and include:
• A strong regional economy at the heart of the Auckland – Hamilton – Tauranga golden triangle
• Significant improvements to major road infrastructure including the Waikato Expressway which on completion will cut up to 35 minutes off the travel time from Auckland to Tirau
• Attractive long term business and investment opportunities as the Inland Freight Hub takes shape and delivers numerous flow-on benefits
• Plans for a more vibrant and exciting CBD
• Hamilton’s excellent services and amenities
• A young and growing population base; and
• Affordable home and land packages