Hamilton Industrial Market Overview Q4 2022

Hamilton industrial market overview

SUMMARY

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.

Industrial vacancy has increased from 0.9% at the end of 2021 to 1.2% in December last year, representing less than 25,000sqm of physically vacant and available space, with almost two thirds of this vacant stock located in Frankton.

Net absorption was over 50,000sqm positive over the survey period, largely due to the completion of new, fully occupied Grade A buildings at the Hamilton Airport and in Te Rapa North, also supported by reasonable occupancy growth in Grade B.

Just over 52,000sqm of new industrial supply is under construction across several projects in Te Rapa North and at the Airport, representing a mix of single-occupier, large warehouse structures and multi-unit typology developments available for lease or purchase.

56,700sqm

New Supply

1.2% Vacancy

50,619sqm

Net Absorption

52,135sqm

Under Construction Pipeline

New Supply

Across the four major Hamilton industrial suburbs of North and South Te Rapa, Frankton and Airport, 56,700sqm of new supply was completed in 2022, bringing the total monitored stock size to 2,058,000sqm. As Figure 1 shows, the bulk of new supply was completed in Te Rapa North and the Airport, with some minor multi-unit completions in Te Rapa South and Frankton.

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. Other notable developments in this precinct include the 2,000sqm expansion at the Multispares site at 1378 Arthur Porter Drive, completion of the unit development at 1370 Arthur Porter Drive of 2,330sqm, Pro Mechanical building at 32 Earthmover Crescent of 1,650sqm and five unit development at 30 Earthmover Crescent of 1,250sqm.

The Airport also experienced some sizeable completions totalling 17,800sqm over the course of 2022. The largest new facility is the 3,780sqm Normans Transport warehouse situated at 32 Ingram Road. Other notable completions include the 1,400sqm Matcraft facility at 119 Ingram Road and the 1,300sqm Insulators Pro Interiors building at 143 Ossie James Drive.

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.

FIGURE 1: Hamilton industrial stock and new supply by suburb

FIGURE 2: Hamilton industrial stock sizes by grade and suburb

Te Rapa North Te Rapa South Frankton Airport Grand Total

Grade A Grade B

Te Rapa North Te Rapa South Frankton Airport

Total Stock in 2021 New Supply in 2022

Supply Pipeline

Construction in the industrial markets will remain steady in 2023 with a number of new builds close to completion or about to start coming out of the ground, with a total floor area of 52,135sqm in the currently surveyed suburbs.

At the same time, there are a number of large development projects also progressing in emerging industrial locations that are not yet part of the monitored areas, such as Tainui’s Ruakura Industrial Hub where three developments have already completed last year (for Peter Baker Transport and Waitomo Fuels). Projects underway at Ruakura include Kmart Distribution Centre of 42,000sqm (approx.), Big Chill of 13,000sqm (approx.) and Maersk of 19,000sqm (approx.). A multi-unit development is planned on Riverlea Road to the south end of Hamilton City, this will total 1,609sqm spread across 17 units.

Industrial land supply in Te Rapa remains under pressure with the majority of the northern precinct already sold for development and occupation, the remaining land in the southern precinct being retained by Chalmers Properties for design build options.

Eyes now clearly look at the options available at Northgate, Horotiu just north of Te Rapa, with new options also opening up at Hamilton Airport. Prospective occupiers looking further afield can also consider land at Hautapu, Cambridge.

The potential of land becoming available in Hamilton still exists though, with work continuing to rezone land in Te Rapa North - that is currently held for future industrial growth - for active industrial use.

FIGURE 4: The new PBT facility at Ruakura

FIGURE 3: Hamilton industrial under construction pipeline (monitored suburbs)

Demand

The industrial market remained reasonably active in 2022, with a total net absorption growth of about 50,600sqm. As Figure 3 shows, the majority of this growth was recorded in Grade A, mostly representing the occupied new supply in Te Rapa North and at the Airport. About half of the total Grade A net absorption growth took place in Te Rapa North.

Key contributors to the positive Grade A net absorption include Tyre Line, Normans Transport and Pro Mechanical, all relocating to their newly completed facilities in Te Rapa North and at the Airport. Frankton was the only district to experience a negative Grade A net absorption (-2,800sqm), mostly attributed to Ikon Commercial vacating 12-14 Charlies Way. The Ikon building accounted for approximately one third of the available space.

Grade B net absorption was also positive, although to a lesser degree (8,700sqm), enabled by moderate take-up activity in Te Rapa North, Frankton and at the Airport, in addition to a sizeable expansion by NZ Post at 12-16 Earthmover Crescent, where the company took up half of the recently completed 7,050sqm warehouse.

Lower quality secondary grade buildings in Grade C and D experienced minimal change in net absorption, with a combined growth of 1,430sqm.

FIGURE 4: Hamilton industrial net absorption 2021

Grade A Grade B Grade C Grade D

Vacancy

Through this survey period Hamilton’s industrial vacancy increased from 0.9% in December 2021 to 1.2% at the end of 2022, with the bulk of the increase being driven by a few larger vacancies across the monitored suburbs.

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 for lease. Newly vacant 12-14 Charlies Way and 18 King Street (previously Ikon Commercial and HDC Flow Technology respectively) contributed roughly 4,800sqm to the vacancy increase, about a third of the total vacant stock in Frankton.

Vacancy remained stable at 1.5% at the Airport Precinct, representing only 3 available units, of which only one is newly vacant.

In terms of quality, the number of vacant options rose in all quality segments, with Grade A recording three new vacancies, increasing the total vacancy rate from 0.1% to 0.4%. Grade B vacancy increased to 1.1%, representing about 7,800sqm of available space. Grade C and D both recorded a moderate increase as vacancy rose to 2.7% and 0.2% respectively.

FIGURE 5: Hamilton industrial vacancy by suburb

FIGURE 6: Hamilton industrial vacancy by quality

Conclusions and outlook

Despite the economic headwinds, the Hamilton industrial market continued to experience strong developer and occupier activity in 2022. Completed new supply amounted to over 56,000 sqm, and although overall vacancy increased somewhat, it was driven more by yet to be tenanted new supply than any significant occupancy loss.

The healthy supply pipeline, especially in Te Rapa North and Hamilton Airport and now the additional areas of Ruakura Industrial Hub (which, given the recent development activity, we are adding to our monitored areas in 2023), Northgate at Horotiu and Hautapu, Cambridge are testament to developer and investor confidence, underpinned by continued above average economic performance of Hamilton where GDP growth was 4.1% in 2022.

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 intensive land take-up around the Waikato Region provides occupiers with choice, either Te Rapa, Northgate at Horotiu, Hamilton Airport, Ruakura or Hautapu (Cambridge). Improving transportation networks (including the now open Eastern State Highway linkage around Hamilton) and the high economic importance of the ‘golden triangle’ of Auckland, Hamilton and Tauranga continue to keep focus on this region as a strong central location and to take advantage of connections to the rest of New Zealand.

Theo de Leeuw

Director – Industrial Sales & Leasing

M: 027 490 3248

E: theo.deleeuw@naiharcourts.co.nz

Nicky Allardice

Industrial Sales & Leasing

M: 021 264 2411

E: nicky.allardice@naiharcourts.co.nz

Sean Stephens

Industrial Sales & Leasing

M: 027 478 1669

E: sean.stephens@naiharcourts.co.nz

Zoltan Moricz

Executive Director - Research

P: 09 359 5399

M: 021 595 399

E: zoltan.moricz@cbre.co.nz