Hot property: New Hamilton top-quality offices in demand as CBD takes off

A “flight to quality” by Hamilton office bosses has created wider momentum in the city’s CBD, forcing other businesses to lift their game in creating productive environments, a commercial property specialist says.

NAI Harcourts managing
director commercial Mike Neale said with new A-grade office developments mushrooming in the city and another 14,000sqm of high-quality floor space coming in the next couple of years, office employers are chasing environments that will help them attract and retain staff.

“It helps attract staff, which helps when you have people coming from somewhere like Auckland. And it helps keep them. Every business owner has a responsibility to create an environment where staff want to be, if they want them to be productive,” Neale said.

For other CBD businesses, new high-quality office developments in their midst and the demand for them had “created momentum”.

“It’s forcing everyone to up their game whether it’s retail, hospitality or even other office buildings. It’s repositioning for the future.

“Those that are investing in their work environment have been doing really well.”

Neale is not concerned the flush of new office developments will expose the CBD to vacancy rate issues in the post-pandemic work culture as many employees choose to work from home.

“While hybrid working and more employee flexibility is here to stay, it doesn’t seem to be a major issue in smaller population centres where commuting to and from the office is perhaps less stressful which, together with the city quickly becoming the focal point of the golden triangle economic area, bodes well for the future of the Hamilton office market.”

“If the culture is good and the environment is good, people would far rather work in an office when they can. But they don’t want to be told when they have to work [where] – they want flexibility.”

Neale said Hamilton was undoubtedly in a major transformation period; many developments were under construction and a wide range of projects in the pipeline in sectors from infrastructure to arts and recreation.

While the development activity might result in some vacancy increase in the short term, he believed occupier demand for high-quality office accommodation would remain strong, particularly as national and multinational businesses evaluated their growth opportunities outside Auckland and Wellington.

Neale said the strong “flight to quality” of recent years had been accentuated by the pandemic. The results of the past two NAI Harcourts CBD office market surveys showed the trend is not just a global phenomenon.

Total Hamilton CBD office stock increased by more than 4000sq m in the second half of 2021, in large part a result of the first completed office building at the new Union Square development.

Neale said three floors of that building had just been leased.

Over the six months to December, overall office vacancy decreased from 8.1 per cent to 7 per cent. Vacancy decreased in B, D and E grades, remained stable in A grade and increased in C grades.

The overall net change in occupied office stock was “reasonably positive” at 3100sq m in the second half of the year, the latest market survey showed.

“While growth was strongly positive in A grade, most lower-quality grades experienced some occupancy loss in the second half of 2021,” the survey summary said.

The total space under refurbishment increased from 14,150sq m to 18,065sq m over the second half.

Many high-quality office projects in the CBD were expected to be completed in the next 12 to 24 months.

One eagerly anticipated project is the redevelopment of the Centre Place North shopping precinct by a Tainui Group Holdings and Kiwi Property joint venture.

Speculated to cost about $200 million, the project is expected to include retail and an office development.

The partners said they were also exploring how to reactivate one of the country’s first underground train stations, mothballed under the retail centre.

A TGH spokesperson told the Herald the plans would be revealed “very soon”.

TGH and Kiwi Property are 50:50 partners in the major Te Rapa shopping precinct, The Base.

The new joint venture will take an initial pre-paid 100-year ground lease. The underlying land will remain in Waikato-Tainui ownership, including land transferred to iwi ownership beneath the existing car park which was owned by Kiwi Property.