The departure of a major occupier in the Hamilton CBD has underpinned high office vacancy levels, at the same time available Grade A office space is the lowest it’s been in over five years, according to new research by CBRE New Zealand.
The MarketView report by the real estate services firm in conjunction with NAI Harcourts shows in the six months to December 2018, overall vacancy increased to 8.8%, representing a 3,720sqm increase in vacant space.
Total office accommodation in the Hamilton CBD has increasing in the six-month period to 253,114sqm.
Grade C makes up 38% of the total office capacity in the market, while lower quality Grades D and E together account for 37%. Higher quality Grade A and B office space together make up 25% of the total stock.
Grade C experienced a large increase in vacancy, with an uplift of 5.6% to 11.9%. This was the result of two new vacancies, the largest being 6,900sqm at Bryce Street with the departure of IRD out of Hamilton’s CBD.
Meanwhile Grade A vacancy is the lowest it has been since December 2013, sitting at 2.2% and a 1.3% decrease from June 2018. Grade B vacancy also sits at 2.7% in six months to December 2018, which is considered low compared to the preceding three years where vacancy has been recorded at between 3.1% and 6.2%.
The overall net change in occupied stock over the six months to December 2018 was negative 8,030sqm mainly due to the increase in Grade C vacancy levels.
In terms of new developments in the pipeline, one of the most notable projects is at the corner of Tristram and Ward Streets. The site, formerly known as Hamilton Central Shopping Centre, has commenced development of a brand-new Kmart store and a new commercial building over three levels with more than 400 car parks.
Completion of the ‘Tristram Precinct’ is set for mid-2019 for Kmart and mid-2020 for the office component. The new space will include occupiers Waikato Regional Council and Opus with a further 2,000sqm of office space and café space.
The report notes the total amount of space currently under refurbishment is is 9,870sqm. Some of the more notable refurbishments include Panama Square, Corner Garden and Worley Place, Sentinel Building at 586 Victoria Street and the former LINZ building at 820 Victoria Street.
CBRE New Zealand’s Head of Research, Zoltan Moricz, says the Hamilton office market has seen an uptick in vacancy due the departure of a large government occupier in a move that was signalled more than two years ago.
“While IRD’s departure is the most recent example of decentralisation, the CBD remains a generally suitable location for Hamilton office occupiers, albeit on the proviso that their space is functional and attractive. The declining levels of Prime A and B grade vacancy throughout 2018 has accordingly limited the availability of suitable options and created opportunity for landlords to reposition their assets.”ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
