Locals battle Aucklanders for Hamilton properties
Hamilton’s CBD is seeing new development and refurbishment projects
Local Hamilton commercial investors are “having to battle increasingly with out-of-region purchasers, particularly Aucklanders, for the limited stock available”, states a new Bayleys’ Research report.
“Strong investor demand and a chronic shortage of stock are also placing further downward pressure on yields,” says Goran Ujdur, Bayleys’ senior research analyst, writing in the agency’s Hamilton Regional Marketbeat.
On the positive side, Ujdur says, Hamilton’s commercial property market has seen a surge in construction with non-residential building consents up 67 per cent over the past 12 months to March 2016.
He says Hamilton’s office sector has seen new development and refurbishment projects attracting tenants from the CBD’s older buildings while low vacancy rates across the city’s industrial precincts has also driven raft of new development. A notable retail market feature has been ownership changes among all the city’s major shopping malls.
The CBD office market faces further challenges if media reports suggesting that the Inland Revenue Department [IRD] may move around 500 staff from the CBD to Te Rapa prove to be correct. “This would be a major blow to the city centre,” says Ujdur. “With a dearth of large occupiers looking for space, this will push already elevated office vacancies higher and set back plans for the revitalisation of the CBD.
“However, there are suggestions the Waikato District Health Board (DHB) may be considering occupying the old Farmers building on the corner of Alexandra and Collingwood Streets. Also having around 500 staff, this would off-set a potential IRD exit.”
Ujdur says that, on the plus side, demand from smaller occupiers for high quality refurbished office space remains solid in the Hamilton CBD.
“A number of local developers are active in this area acquiring older secondary premises and refurbishing them to either an A or B grade standard.”
Stark Property is involved in several projects the largest being the redevelopment of the old Med Lab building on the corner of Anglesea and Knox Streets which is undergoing an architecturally-designed conversion to high grade office accommodation. Completion is expected later this year.
Stark has also purchased the historic Beggs Wiseman building on the corner of Victoria and Ward Streets for $1,050,000 with plans for a complete refurbishment.
Foster Construction has commenced work on the Genesis Energy redevelopment of the former Countdown building on the corner of Tristram and Bryce Streets with completion due mid-2017 and around 600 Genesis Energy staff set to move into the building.
Fosters Construction is also underway with a new development for the Corrections Department in London Street which, when complete in December of this year, will house 180 staff.
Ujdur says there is a growing “disconnect” between rents on existing office space, which have recorded little if any growth, and those for new builds which need to factor in sharp increases in land and construction costs.
On the retail front, development activity has surged across Hamilton over the past 12 months with building consents by value up around 200 per cent. One of the largest projects currently underway is the new $24.7 million Bunnings Warehouse on the corner of Kahikatea Drive (State Highway 2) and Quentin Drive, between Frankton and Melville which is expected to open late this year.
A new Mitre10 is also under development on the corner of Wairere Drive and Ruakura Rd Hamilton East with completion expected in the second half of this year.
Changes in shopping centre ownership have included: Scentre Group selling Westfield Chartwell to Stride Diversified NZ Property Fund Ltd; Kiwi Property Group selling Centre Place South to an unnamed New Zealand buyer; and Kiwi Property acquiring a 50 per cent stake in The Base Shopping Centre in Te Awa from Tainui Group Holdings (TGH).
“Hamilton CBD retail conditions continue to remain challenging with city strip retail, in particular, continuing to come under pressure with high levels of vacancies and softer pedestrian traffic,” says Ujdur.
The latest Bayleys Research industrial vacancy survey for Hamilton shows that the investment market remains very tight with fierce competition for industrial properties offered for sale and owner occupiers largely dominating activity.
As at March 2016 the overall vacancy rate was a low 5.4 per cent, up just marginally from the previous year’s 5.1 per cent.
Ujdur notes that an increasing number of car yards around Hamilton appear to be changing hands reflecting a shift to a better usage of high profile sites.
“With all major land use consents now gained, earthworks for the major inland port at Ruakura are likely to commence within 12 months. Major investment going into road and rail connections will see Ruakura act as an enabler of freight flows, which are expected to double over the next 20 years.”
Goran Ujdur of Bayleys