Te Awa Lakes Assessment of Economic Effects Prepared for Perry Group Limited
12 October 2017
Document Quality Assurance
Bibliographic reference for citation: RCG Limited 2017. Te Awa Lakes: Assessment of Economic Effects. Report prepared by RCG Limited for Perry Group Limited.
Prepared by: John Polkinghorne Associate Director RCG Limited
Status: Final Revision / version: 7 Issue date: 12 October 2017
Use and Reliance
Every effort has been made to ensure the soundness and accuracy of the opinions, information, and forecasts expressed in this report.
Information, opinions and forecasts contained in this report should be regarded solely as a general guide. While we believe statements in the report are correct, no liability is accepted for any incorrect statement, information or forecast. RCG disclaims any liability that may arise from any person acting on the material within.
RCG Limited is the author of this report, and therefore holds all copyright and intellectual property rights relating to it. RCG requires that all parties permitted to use the report and the research contained within the report give full and correct acknowledgement of its authorship.
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Cover photograph: © Boffa Miskell Limited, 2017
CONTENTS
1.0 Introduction 1
Te Awa Lakes 1 The Purpose of This Report 2 Abbreviations 2
2.0 Nearby Land Uses 3
Overview of Te Rapa North, Horotiu and Surrounding Areas 3 Key Land Uses 3
3.0 Industrial Land Availability 8
Before Future Proof (The Mid-2000s) 8 After Future Proof (2009 Onwards) 9 Industrial Land Uptake 9 The UNISA Program 11 Property Market Research 12 The Current Market (2017) 14
4.0 Industrial Consents Data 15
5.0 Housing Supply and Demand 17
National Population Growth 17 Local Population Growth 18 Declining Household Sizes 19 Stats NZ Projections 19 NIDEA Projections 21 Housing Demand and Supply 21 House Prices and Affordability 22
6.0 Tourism in the Waikato 24
Tourism and the New Zealand Economy 24 Forecasting Tourism Spending 24 The Commercial Accommodation Monitor 25 The Waikato RTO 25 Overall Guest Night Trends 26 Occupancy Rates 27 Regional Tourism Estimates 28
Hamilton Hotel Demand Assessment 30 Hotel Demand in Other Cities 31 Cycle Tourism 32 Summary 32
7.0 Te Awa Lakes Tourism Effects 35
Tourism Benchmarks and Visitor Numbers 35 The Adventure Park at Te Awa Lakes 35 Accommodation at Te Awa Lakes 36 Te Awa Lakes Tourism Effects 36 The Hamilton CBD 37 Summary 38
8.0 Retail Demand 40
Retail Demand from Households 40 Floor Space Demand 41 Retail Demand from Visitors 42 Retail Demand from Other Shoppers 43 Centre Assessment Reports 43 Conclusions 44
9.0 Response to Peer Review 46
Industrial 46 Residential 48 Tourism 49 Retail 51
10.0 Conclusions 52
The Industrial Market 52 The Adventure Park and Accommodation 52 Retail at Te Awa Lakes 53 Housing at Te Awa Lakes 53 Overall Conclusions 54
Figures
Figure 1-1: Te Awa Lakes Context. Source: RCG ...... 1
Figure 2-1: Northgate Business Park Concept Plan. Source: www.northgatepark.co.nz/Documents/Northgate-Overall- Concept-Plan-June-2016.pdf ...... 5
Figure 2-2: Adjacent Landuses ...... 7
Figure 3-1: Hamilton Industrial Land Sales & Prices. Source: CBRE via Strategic Risk Analysis Ltd ...... 10
Figure 4-1: New Industrial Floor Space Consented (New Zealand-wide). Source: Stats NZ building consent data for new “factories, industrial, and storage buildings” ...... 15
Figure 4-2: New Industrial Floor Space Consented (Waikato Sub-Region). Source: Stats NZ building consent data for new “factories, industrial, and storage buildings” ...... 16
Figure 5-1: NZ Population Growth 1992-2016. Source: RCG, Stats NZ ...... 17
Figure 5-2: Auckland Population Flows. Source: RCG ...... 18
Figure 5-3: Stats NZ Population Estimates and Projections for Hamilton. Source: RCG, Stats NZ ...... 20
Figure 5-4: Homes Consented in the Future Proof Area. Source: RCG, Stats NZ ...... 22
Figure 6-1: Waikato RTO Accommodation for the Year Ended March 2017. Source: Commercial Accommodation Monitor ...... 26
Figure 6-2: Moving Annual Total (MAT) Guest Nights in Hamilton City. Source: Commercial Accommodation Monitor ...... 26
Figure 6-3: Domestic and International Guest Nights in the Waikato RTO. Source: Commercial Accommodation Monitor ...... 27
Figure 6-4: Domestic Visitor Spending in the Waikato RTO. Source: MBIE, RCG ...... 29
Figure 6-5: International Visitor Spending in the Waikato RTO. Source: MBIE, RCG ...... 29
Figure 6-6: Visitor Spending in the Waikato RTO ($m, Year Ended Mar 2017). Source: MBIE, RCG...... 30
Figure 8-1: Retail Spending from Te Awa Lakes Households. Source: RCG ...... 40
Figure 8-2: Floor Space Demand from Te Awa Lakes households (in m2). Source: RCG ...... 41
Figure 8-3: ‘Small Format’ Floor Space Demand from Te Awa Lakes households (in m2). Source: RCG ...... 41
1.0 Introduction
Te Awa Lakes
1.1 Te Awa Lakes is a proposed mixed-use development in Hamilton City, 11 km from central Hamilton travelling along Te Rapa Road.
1.2 Figure 1.1 below shows Te Awa Lakes outlined in red, with the Waikato Expressway along its western boundary. Note that the areas west of the Expressway are in the Waikato District, and are not part of the current plan change:
Figure 1-1: Te Awa Lakes Context. Source: RCG 1.3 At present, the 62-hectare plan change area has Te Rapa North Industrial zoning. This zoning allows 7 hectares to be developed for industrial purposes prior to 2021, with another 23 hectares available after 2021. The remaining 30 hectares would not be developable until rezoned. This would only happen when infrastructure was in place, and only if there was no threat of oversupplying land. Industrial demand and supply issues are considered at the city, sub-region and regional level, as outlined later in this report.
1.4 The Te Awa Lakes site has been used for sand quarrying, but these operations are in the process of being disestablished.
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1.5 Perry Group, the landowner and developer of Te Awa Lakes, is now working towards a mixed- use development for the site, via a private plan change process. Proposed uses include an “Adventure Park”, along with related tourism and accommodation uses, and residential housing.
1.6 An initial stage of development opened in 2016, and included a retail ‘service centre’ with BP and several retail tenancies, and a community bike park. These uses were approved via an Indicative Development Plan process, which enabled 7.63 hectares of development (only partially completed).
The Purpose of This Report
1.7 RCG has been engaged by Perry Group to assess the economic effects of the plan change.
1.8 Our report is necessarily quite wide in scope. We have had to consider the proposed uses for the site (tourism, commercial, and residential), as well as the uses allowed under the existing zoning (industrial, albeit with large-scale development deferred). This wide variety of uses must also be considered within the planning framework, including the Regional Policy Statement, Future Proof and Partly Operative District Plan.
1.9 Other relevant documents include the National Policy Statement on Urban Development Capacity and the Hamilton Housing Accord.
1.10 Our report works through the following steps:
• Analysis of various industrial indicators in the Future Proof area to gauge demand and supply; • Analysis of residential demand and supply in the Future Proof area; • Information on the local and national tourism industry, and the potential for tourism- related uses at Te Awa Lakes, and flow-on benefits as a result; • Retail demand modelling and comments on Centres Assessment Report matters; • Conclusions on the overall economic effects of the proposed plan change.
Abbreviations
1.11 Our report uses the following abbreviations:
• GDP – Gross Domestic Product • LFR – Large Format Retail • NIDEA – National Institute of Demographic and Economic Analysis • RTO – Regional Tourism Organisation • Stats NZ – Statistics New Zealand • SRA – Strategic Risk Analysis Ltd • UNISA – Upper North Island Strategic Alliance
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2.0 Nearby Land Uses
2.1 Te Rapa North was transferred from the Waikato District to Hamilton City in 2011. It is defined as the area “bounded by Horotiu in the north, the Waikato River to the east, the… [Waikato Expressway] in the west, and Ruffell Road to the south”.1 The same definition is used in the Waikato Regional Policy Statement.
2.2 Horotiu is part of the Waikato District, and consists of those areas west of the Waikato Expressway.
2.3 Te Rapa North and Horotiu are adjacent to one another, separated only by the Waikato Expressway. Effectively, they operate as a single node from an industrial location perspective.
Overview of Te Rapa North, Horotiu and Surrounding Areas
2.4 Both Te Rapa North and Horotiu contain a mix of rural uses, country living uses (lifestyle blocks etc) and industrial uses. Many of these uses have been there for many decades, predating Hamilton’s northwards expansion in places like Rototuna, Flagstaff and Rotokauri.
2.5 The village of Horotiu is home to several hundred people. The larger town of Ngaruawahia (with more than 5,000 people) is just 5 km further north.
2.6 To the south of Te Rapa North, the Pukete Farm Park is a major recreational land use along both sides of Pukete Rd, covering some 90 hectares. The Te Rapa area, centred around Te Rapa Rd, is a mixed industrial/ retail hub. Most of the retail uses are contained in The Base shopping centre, and along Te Rapa Rd itself.
2.7 Rotokauri is a major growth node for Hamilton, with a range of uses being provided for as laid out in the Structure Plan. These include industrial uses between the railway line and the Waikato Expressway, other ‘employment’ uses west of the Expressway, and residential uses beyond that.
Key Land Uses
2.8 The marked-up aerial photo attached at the end of this chapter shows the key non-rural land uses in Te Rapa North and Horotiu. The ‘key land uses’ described below are numbered as 1-10 on this aerial photo.
AFFCO Landholdings (map reference 1)
2.9 The AFFCO Horotiu meat processing and rendering plant has been on the site since 1915.2 It is AFFCO’s largest capacity beef plant. This operation “is one of the biggest employers in the Waikato, paying around $22 million per year in wages and salaries”, “employs approximately
1 http://www.hamilton.govt.nz/our-council/news/Pages/default.aspx?newsItem=1679 2 http://www.affco.co.nz/locations/processing/
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500 staff at peak”, and “makes a direct annual contribution of around $110 million to the Waikato regional economy”.3
2.10 AFFCO owns approximately 70 hectares of land in Horotiu, including areas of undeveloped land around the plant. We are unsure as to AFFCO’s future plans for this land, and the nature of AFFCO’s operations may preclude neighbouring development. However, some of the land may become available for development in the future.
2.11 We note that a dairy processing plant has been consented on part of the AFFCO land, by Open Country Dairy Ltd.
RX Plastics (map reference 2)
2.12 This is a 9.1 hectare site, approximately half of which has been built on for RX Plastics (including a building, and storage/ display areas). The other half appears to be undeveloped.
Horotiu Masonry Plant (map reference 3)
2.13 This plant is owned by AML Ltd, a joint venture between Holcim and Allied Concrete.
Various Industrial (map reference 4)
2.14 This site is occupied by Kiwi Timber Supplies, Machinery and Marine, and PotBlack (a pool table factory and shop).
Northgate Business Park (map reference 5)
2.15 Northgate Business Park is a major industrial park development, with stage one already subdivided. The total area available for development will be around 100 hectares.
2.16 Waikato Milking Systems was an early tenant for the park, with buildings completed in 2013 and 2014. Several other sites in stage one have been sold, to Universal Precast, Speedwall Ltd and Waikato Chocolates.4
2.17 Ports of Auckland have purchased 33 hectares of land for a freight hub, and began construction in late 2016. The port will develop its operations here gradually, and we understand that Ports of Auckland sees this as a ten year project.5
2.18 The first stage of the freight hub will provide earthworks, services and a road connection, along with “a small 1-2 ha container pavement… [which will be] the starting point to open the freight hub… this stage is planned to be complete by late 2017/ early 2018”.6 Beyond this timeframe, future stages will “happen organically with construction of further areas of pavement and warehousing to keep up with demand”.
3 “AFFCO NZ Limited Horotiu Processing Plant: Application for Resource Consents Assessment of Environmental Effects”, June 2015. Retrieved from https://www.waikatoregion.govt.nz/assets/PageFiles/39263/Appln%20and%20AEE.pdf 4 http://openwaikato.co.nz/invest/Detail/4043/waikato-welcomes-ports-of-auckland 5 Personal communication from John Olliver of Bloxam Burnett & Olliver 6 “Waikato Freight Hub” pamphlet, Ports of Auckland
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2.19 As such, although Ports of Auckland has purchased a large area of land to safeguard its future expansion, ‘uptake’ of the land will happen progressively rather than all at once.
Figure Error! No text of specified style in document.-2: Northgate Business Park Concept Plan. Source: www.northgatepark.co.nz/Documents/Northgate-Overall-Concept-Plan-June-2016.pdf
Horotiu School (map reference 6)
2.20 Horotiu School is a primary school with some 240 students.
SD European (map reference 7)
2.21 This site is partially occupied by SD European, a vehicle servicing company. The landowner also owns two neighbouring houses and undeveloped land on the corner of Horotiu Bridge Rd and Great South Rd.
Keith Hay Homes (map reference 8)
2.22 This site consists of showhomes for Keith Hay Homes.
Sikh Temple (map reference 9)
2.23 This is a temple used by the Sikh community in the Waikato.
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Fonterra Landholdings (map reference 10)
2.24 Fonterra’s Te Rapa manufacturing site was established in 1967 and has 500 employees.7
2.25 As with AFFCO, Fonterra owns substantial areas of undeveloped land around its plant, including some 70 hectares between Te Rapa Rd and the railway line (across the road from the main plant). The Waikato Regional Policy Statement aims to “enable the development of a cluster of dairy related industrial activities”, and Fonterra’s land would be an obvious place for this to occur.
2.26 We are unsure as to Fonterra’s future plans for this land, but some of it may become available for development in the future. We understand that, as with Te Awa Lakes, a 7 ha portion of the land currently has ‘live’ industrial status, with another 23 ha of development possible after 2021.
7 http://nzdairies.com/nz/en/About/Our+Locations/NewZealand/Te+Rapa
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Figure Error! No text of specified style in document.-3: Adjacent Land uses
3.0 Industrial Land Availability
3.1 This chapter gives a brief overview of the supply and demand dynamics for industrial land in the Waikato, over the last decade and into the future.
3.2 This can be summarised as follows:
• Mid-2000s: industrial land shortage in Hamilton, with high prices and very little vacant land; • 2009: Future Proof strategy sets out a land release programme for industrial land across the sub-region, in a large number of dispersed areas; • 2016: Regional Policy Statement directs industrial land supply to be focused in “Strategic Nodes”, rather than dispersed; • 2017: the Hamilton land market appears healthy compared with other NZ cities and the Hamilton situation in 2007.
Before Future Proof (The Mid-2000s)
3.3 According to the Future Proof website, “an industrial land shortage has in the past been a major issue for the sub-region”.8 By the mid-2000s, this was a major policy concern.
3.4 Bayleys research from 2007 notes: “The lack of suitably zoned industrial land in Hamilton is pushing up land values as well as rental rates. Over the last year indicative land values have increased from between $120 to $170 to between $140 and $190 per square metre in Frankton, with reports that this could soon top out at $200 per square metre… The demand for industrial land in Te Rapa has increased further with values now ranging between $260 and $350 per square metre compared to $195 and $275 per square metre recorded 12 months ago”.9
3.5 Bayleys mentioned the proposed Rotokauri Structure Plan as helping to “alleviate the shortage of land in the future”.
3.6 A 2007 report by Andrew Mead at Hamilton City Council outlined that vacant industrial land was in short supply.10 Based on our reading of that report, it showed that there was 40 hectares of vacant industrial land in Hamilton, with only 16 hectares “actually available for industrial development” – the remainder being landbanked or planned for non-industrial uses.
3.7 A 2008 report by Strategic Risk Analysis Ltd (SRA),11 also gives some insight into the conditions of the time. This includes high land values driven in large part by speculation, and out of step with what industrial occupiers could actually afford to pay. SRA refer to “a chronic shortage of land available for industrial development at affordable prices”.
8 http://www.futureproof.org.nz/page/56-what-are-our-focus-areas+business-and-industrial-land+industrial-land 9 “Hamilton Regional Focus”, Bayleys, 2007 10 “Hamilton Industrial Land Study”, authored by Andrew Mead, Policy Analyst, Strategic Unit, Hamilton City Council, and dated May 2007 11 “Developer Perceptions: Greenfield industrial subdivisions”, June 2008. Retrieved from http://www.futureproof.org.nz/file/SubregionalIndustrialReport.pdf
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After Future Proof (2009 Onwards)
3.8 In response to the shortages of the mid-2000s, the Future Proof program identified a number of areas for industrial land expansion, and tools for ensuring that industrial land supply was protected.
3.9 The “Growth Strategy & Implementation Plan 2009”, produced by the Future Proof partners, outlines provision for 1,927 hectares of new industrial land in the 50 years to 2061. This is split across three periods (2011-2021, 2021-2041, 2041-2061) and a range of areas, including “Strategic Nodes” such as Te Rapa North and Horotiu.
3.10 Subsequent reviews found that this level of provision was actually significantly more than the likely requirements, which could add to a new problem – one of oversupply. This could have resulted in an inefficient and dispersed urban form.12
3.11 As such, the Waikato Regional Policy Statement eases back on the level of provision. Policy 6.14 states that “new industrial development should predominantly be located in the strategic industrial nodes in Table 6-2”, with these nodes having an allocation of 1,148 hectares over 50 years.
3.12 Many of the Strategic Industrial Nodes have now been at least partially zoned for industrial use, and along with vacant zoned land in other areas (e.g. Te Rapa), the supply and pipeline situation now appears much less constrained than it was in the mid-2000s.
Industrial Land Uptake
3.13 The work programmes to create the Future Proof report and Waikato Regional Policy Statement have involved detailed analysis of industrial land uptake, both in the past and projected in the future. These analyses have been important in determining how much industrial land should be provided, and over what timeframe.
3.14 The SRA report cited in paragraph 3.7 shows historical information on industrial land uptake in Hamilton City, based on “sales net of resales, largely reflecting sales by developers to end-users but including some sales to spec buyers”. This information, which SRA sourced from real estate agency CBRE, is reproduced below with land uptake shown as a black line:
12 http://www.futureproof.org.nz/file/Business-Land-Review/future-proof-business-land-reconciliation-081210.pdf
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Figure Error! No text of specified style in document.-4: Hamilton Industrial Land Sales & Prices. Source: CBRE via Strategic Risk Analysis Ltd
3.15 Based on this data, uptake of industrial land in Hamilton averaged 8.2 ha per annum over 1992- 2008. The SRA report notes that: “Some people interviewed suggested the annual demand for land was significantly more than 8.2 ha, but this will partly reflect the double counting of land sales (i.e. sales by developers to investors plus the resales by investors to end-users), while it is possible that the CBRE data does not include some of the land sales outside Te Rapa and Frankton”.
3.16 The Hamilton Industrial Land Study estimated industrial land uptake at 11.95 ha per annum over 2002-06, using a methodology “based on building consents data”. However, building consents are focused on the area of buildings, not the area of the land they sit on. It is not clear whether the report converts the consented building area to an estimated land area, based on assumptions around site coverage, or whether it has simply added up the site areas for all industrial-zoned properties which had building consents approved over 2002-2006. The report mentions that “past take up rates reflect significant retail development in the industrial area”, so we believe the latter is more likely. In fact, the uptake may be doubly overstated, as it could include both retail uses on industrial land, as well as new or extended buildings on existing industrial sites (rather than new greenfields land being developed for the first time).
3.17 Overall, this study covers a short time period, during a time of strong economic growth, and has a somewhat unclear methodology. As such, its figure of 11.95 ha per annum should be treated with caution. In our view, though, this figure seems to support the earlier figure of 8.2 ha per annum for Hamilton City, over a long time period which included several economic cycles.
3.18 The 2009 Future Proof report, covering the entire sub-region rather than just Hamilton City, notes: “The starting point for determining probable need is the average consumption rate of industrial business land over the last 10 years of 18 hectares per year [across the sub-region]. It is noted that this consumption rate includes a wide mix of uses… Looking ahead, an annual average consumption rate of 27 hectares has been assumed, given: the trend toward larger-
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footprint developments, a tendency for landowners to land bank, larger areas needed for low- impact stormwater management, and the need for surplus capacity to accommodate economic cycles”.13
3.19 Notwithstanding the different data sources and time periods, it seems that industrial land uptake in Hamilton has historically averaged around 8 hectares per annum, versus 18 hectares for the entire sub-region. The 2009 Future Proof report states a desire to provide for more rapid uptake of 27 hectares per annum across the sub-region, but it actually recommends that even more land than this be made available: 1,927 hectares, as noted in paragraph 3.9of our report.
3.20 However, the Future Proof Business Land Review report from 2010 estimated that “the subregion will require some 805ha (Gross Developable Area) of industrial land to 2061”.14 This is equivalent to 16 hectares per year, similar to historical rates of uptake.
3.21 Policies in the Waikato Regional Policy Statement provide more than enough land to cater for this expected demand in the Future Proof sub-region, with 1,148 hectares (23 hectares per year) in the Strategic Industrial Nodes alone. Much of this is already zoned. As shown in Table 6-2 of the Regional Policy Statement, 337 hectares is allocated in the 2010-2021 period, or 31 hectares a year, with the rate slowing beyond 2021.
3.22 As such, the Future Proof sub-region is more than adequately provided for in terms of future industrial land supply, for both the medium term (to 2021) and the longer term. Given the modelled and historical rates above which suggest 16-18 hectares a year uptake, the area of land enabled in the Regional Policy Statement could in fact create an oversupply. This could undermine the goal of a spatially efficient economy.
The UNISA Program
3.23 The Upper North Island Strategic Alliance (UNISA) is “an agreement to establish a long term collaboration” between councils in the upper North Island “for responding to and managing a range of inter-regional and inter-metropolitan issues”.15
3.24 The UNISA program so far has focused on subjects related to freight, ports and industry. A 2015 report found that the area of occupied industrial land across the UNISA area had risen “from approximately 7,300 hectares to approximately 9,500 hectares” between 1996 and 2012.16 This is an uptake of 137.5 hectares per year across the Northland, Auckland, Waikato and Bay of Plenty regions.
3.25 Unfortunately, the report does not break down the increase at the territorial authority (or even regional) level. As an indication, though, Hamilton City accounted for 7.7% of industrial floor space consented in the UNISA area over 1996-2012, and the Future Proof sub-region accounted for 10.6%. If the same proportions held true for land uptake, Hamilton’s uptake would have been 10.6 hectares per year, and the overall sub-region’s uptake would have been 14.6 hectares per year. These results are in the same ballpark as those in paragraph 3.22.
13 “Growth Strategy & Implementation Plan 2009”, Future Proof 14 “Future Proof Business Land Review: Summary Report of Findings and Recommendations”, Latitude Planning Services, 2010 15 www.hamilton.govt.nz/our-city/regional-alliances/UNISAfreightstory/Pages/default.aspx 16 “Upper North Island Industrial Land Demand”, BERL, February 2015
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3.26 Sections 4 and 5 of the 2015 UNISA report also outline a detailed methodology for predicting future industrial land requirements. The report works through this approach for the Northland region. Significant resources are required to carry out this methodology, and in practise we expect that it would generally be used in collaboration with councils, who can provide key inputs.
3.27 The UNISA report explains the two different types of models – the more commonly used ‘labour supply’ models, and ‘industry demand’ models. According to the report, “there is wide variation in the demand for industrial land under labour supply models, and less extreme variation under industrial demand models”, and as such the latter type of model is preferred.
3.28 We consider that both types of model should be ‘sense checked’ against historical data, which is reasonably straightforward to obtain. We summarise some of the previous land uptake estimates above, and historical building consent (floor space) data in chapter 4.0 below.
Property Market Research
3.29 This section summarises research from Colliers and Bayleys on the Hamilton industrial market, and the New Zealand market generally. Other agencies, such as JLL, CBRE and Knight Frank, also produce industrial research from time to time, but they focus on the larger markets rather than Hamilton.
Colliers
3.30 According to 2016 research from Colliers,17 average warehouse net rents in Hamilton are $81/m2, with average (industrial) office net rents in Hamilton at $129/m2. Average yields are 7.8%, with 297 ha of industrial zoned vacant land in the Waikato. Demand and supply are both expected to increase, suggesting a growing industrial market in Hamilton.
3.31 These rents are lower, and the yields are higher, than for the other main centres covered by Colliers – with the exception of Dunedin, which has warehouse rents of $68/m2, office rents of $113/m2, and yields at 8.6%.
3.32 By comparison, Auckland has the tightest industrial market with warehouse rents of $103/m2, office rents of $196/m2, and yields at 6.8%. Auckland vacancy rates are at record lows of 2.2%, which should drive further development in the market. Colliers refer to “relentless occupier demand” in Auckland.
3.33 Colliers note: “Hamilton’s recent boost to leasing activity reduced vacancy rates and kept the pressure on investors when bidding for prime space. Land supply remains a vital component of the sector’s health with recent uptake by the Ports of Auckland [at Northgate Business Park] generating opportunities for others”.
3.34 Colliers also note: “In a sector that is showing growing levels of optimism and activity, the one disconnect is the significant amount of land supply currently zoned or with the potential for future industrial zoning as identified in the District Plan by Hamilton City Council”.
17 “New Zealand Industrial” report, Colliers, July 2016. Retrieved from http://www.colliers.co.nz/find%20research/industrial/industrial%20research%20report%202016/
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3.35 Colliers International’s 2016 Vacant Industrial Land survey showed that there is currently 297 ha of land available, with a further 527 ha of non-industrial zoned land earmarked for potential future industrial use. In the past year, industrial zoned land absorption increased to 41ha with prominent sales like Ports of Auckland’s purchase of 33ha boosting demand and generating opportunities.
3.36 Our reading of this is that Colliers see Hamilton as currently being well supplied, or even oversupplied, with industrial land. Their second paragraph appears to state that the “significant” amount of zoned or potential land is a challenge for the “optimism and activity” in the sector, i.e. an oversupply could actually hurt the market.
3.37 Summarising the Colliers report on the nationwide industrial sector, it would be fair to note that the sector is expanding, with supply shortages in some cities (especially Auckland). Hamilton does not currently seem to be subject to these same issues, and indeed may be at risk of an oversupply.
Bayleys
3.38 Bayleys cover Hamilton industrial in their autumn 2016 Marketbeat report, “Hamilton Regional Report”.18 This includes data to March 2016. The Bayleys survey covers approximately 690,000 m2 of floor space in Te Rapa, Frankton, Te Rapa North and Avalon, and indicates generally low vacancy rates for industrial buildings, with almost no vacant floor space in Te Rapa North.
3.39 Bayleys note: “With all major land use consents now gained, earthworks for the major inland port at Ruakura are likely to commence within 12 months. The port will support the requirements of a range of freight users who are expected to locate within the adjacent logistics hub. 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”.
3.40 Bayleys also note: “The tight market conditions are, in fact, prompting some rural land owners close to popular industrial areas such as Te Rapa/Gateway to consider offering unserviced bare land to the market”.
3.41 Again quoting from Bayleys: “The latest Bayleys Research industrial vacancy survey for Hamilton shows that conditions remain tight across all the major traditional industrial areas. As at March 2016 the overall vacancy rate was a low 5.4%, up just marginally from the previous year’s 5.1%”.
3.42 We note that Bayleys’ vacancy comments above refer to industrial buildings, rather than industrial land. In our view, they reflect a reasonably healthy market for industrial floor space, with vacancies sufficiently low that they should prompt additional development.
3.43 Bayleys estimated that rents had been roughly flat over the previous 12 months, and expected this to remain the case for the next 12 months.
18 http://www.marketbeat.co.nz/hamilton-regional-autumn-2016/
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The Current Market (2017)
3.44 Industrial sites are being offered for sale or lease in various areas around Hamilton and the Waikato. These include Te Rapa Gateway and Northgate Business Park, as discussed in chapter 2.0.
3.45 Te Rapa Gateway is currently advertising industrial sites for sale at $240-$300/m2, for newly subdivided sites between the Waikato Expressway and railway line.19 This is a similar price level to the values given by Bayleys in their 2007 research.
3.46 The availability of land in this price range ten years on indicates how severe the shortage of land was in 2007 – or at least, how far out of step land values were with fundamentals. Furthermore, interest rates are much lower in 2017 than in 2007, and low interest rates tend to inflate land prices (the interest costs of funding a land purchase are lower, making high prices more bearable).
3.47 Northgate Business Park is also selling land, although the prices are not listed on its website. We expect that prices would generally be lower than those offered at Te Rapa Gateway, as the location is more remote.
3.48 Te Rapa itself has also been seeing development. A vacant 0.93 hectare site at 169-181 Maui Street was recently put up for sale by tender closing 9 March 2017. Several other sites are available for sale or lease on Kahu Crescent and The Boulevard.
3.49 Titanium Park is a planned industrial park of around 65 hectares, which surrounds Hamilton Airport. Planning approval for the estate was granted in 2009, and Torpedo7 (now part of The Warehouse Group) became an early occupier, buying a 12 hectare site in 2011. In June 2017, packaging and recycling business Visy was announced as having purchased an 8.5 hectare site. Various other sites are available for sale. Again, prices are not listed on the website.
3.50 As of July 2017, earthworks for Ruakura are underway, with the first stage of the inland port aimed to open in the first half of 2019. Landowner Tainui Group Holdings has formed a joint venture with LINX Cargo Care Group to develop and operate the inland port.20
3.51 Other industrial sites within Ruakura are likely to be available in the short term, to complement the inland port activity. Home building is also underway in the northern parts of Ruakura, between Greenhill Rd and Carr Rd. The first homes have already been completed.
3.52 It is also worth noting that parts of the former Franklin District, including Pokeno and Tuakau, have been transferred into the Waikato District. Technically, these areas are now part of the Waikato sub-region, although in practise they are more closely tied to the Auckland market: they are very close to Pukekohe, and with easy access to the wider Auckland area.
3.53 Pokeno is seeing rapid residential growth, with the major Pokeno Village Estate subdivision and smaller developments such as Kowhai Downs. The Gateway Business Park is also underway: the Yashilli dairy plant opened in 2015 on a 6.7 hectare site, and Hynds Group is also developing a manufacturing site. Various smaller sites are being offered for sale or lease.
19 http://www.terapagateway.com/site-plan/, retrieved 24/3/2017 20 http://auckland.scoop.co.nz/2017/06/tgh-and-linx-join-forces-at-ruakura/, retrieved 3/7/2017
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4.0 Industrial Consents Data
4.1 Building consent data provides an accurate, consistent indicator of industrial development and growth. However, it does not fully capture industrial use of land. For example, an industrial property may include yards, carparks, and land set aside for future expansion.
4.2 The figure below shows how much floor space has been consented across New Zealand over the last 27 years, for years ended March 1991-2017:
Figure Error! No text of specified style in document.-5: New Industrial Floor Space Consented (New Zealand-wide). Source: Stats NZ building consent data for new “factories, industrial, and storage buildings”
4.3 These floor areas exclude alterations to existing buildings. In the early 1990s, alterations made up around 40% of industrial consents by value, but today the figure is 15%-20%. Consents data also excludes demolition of old industrial buildings, and conversion of industrial buildings to other uses (e.g. retail or residential. Overall, consents data on ‘new’ industrial floor area should be a good indicator of industrial expansion.
4.4 Consents have fluctuated significantly over the last 27 years, due to economic cycles and other factors. The long-term average is 852,000 m2 of new floor space consented a year. Development fell behind this average in the years ended March 2010-2013, reflecting the Global Financial Crisis and recession, and has exceeded it for the last four years, reflecting an economic rebound and somewhat of a ‘catch up’ on the previous four years.
4.5 Consents in the Waikato area have been more ‘lumpy’, as is generally the case for regional markets – the timing of individual developments can make a big difference to the figures, whereas these factors tend to cancel out at the national level.
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4.6 The chart below shows the floor space consented in the combined Hamilton, Waipa and Waikato territorial areas:
Figure Error! No text of specified style in document.-6: New Industrial Floor Space Consented (Waikato Sub-Region). Source: Stats NZ building consent data for new “factories, industrial, and storage buildings”
4.7 The long-term average for the Waikato sub-region is 49,800 m2 of new floor space consented a year. Notwithstanding the ‘lumpiness’ issue, the sub-region has followed similar trends to New Zealand, with consents generally below average in the years ended March 2009-2013, and above average in the last four years.
4.8 We also note that the years ended March 2003-2007 (essentially the period covered by the 2007 Hamilton Industrial Land Study) had particularly high activity, especially the years ended March 2005 and 2006 where consents were more than double the long-term average.
4.9 Since April 1990, around 67% of new industrial development in the Waikato sub-region has been in Hamilton City, measured either by value or floor area. The Waikato District had around 20% of new development measured by value or 18% by floor area, and the Waipa District had around 12% of new development measured by value or 14% by floor area.
4.10 Industrial trends, and land uptake, could change in the future. However, the picture for New Zealand-wide building consents (Figure Error! No text of specified style in document.-5) shows a reasonably steady level of activity, albeit affected by upturns and downturns. There is no clear evidence of consents (and likely land demand) trending upwards or downwards, and as such historical trends are likely to give a good guide for land uptake. The UNISA report also seems to support this, noting that “the trends in each industry are relatively slow-moving”.
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5.0 Housing Supply and Demand
5.1 This chapter looks at housing supply and demand in Hamilton and the surrounding districts.
5.2 We begin by looking at population growth, the key driver of housing demand. We look at recent trends (record migration, etc), and projections for the future.
5.3 We then look at housing supply, i.e. building consents information. We also briefly comment on house prices and affordability.
National Population Growth
5.4 At the national level, population growth comes from:
• Natural increase (births minus deaths – reasonably consistent from year to year); • Net international migration (immigration minus emigration – can fluctuate dramatically from year to year). 5.5 These two sources of population growth are shown in Figure Error! No text of specified style in document.-7 below:
Figure Error! No text of specified style in document.-7: NZ Population Growth 1992-2016. Source: RCG, Stats NZ
5.6 Net migration has been at record levels for the last three years, continuing into 2017. International immigration has been the dominant factor in NZ’s population growth over this
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time. However, past experience shows that migration flows can turn around very quickly, and the government announced a tightening of immigration policy in April 2017.21
5.7 Even so, it seems likely that on average, immigration in the future will be higher than it has been historically. For example, recent projections from Stats NZ assume higher levels of migration than had been used in the past.
Local Population Growth
5.8 At the local level, population growth comes from natural increase and international migration as above, as well as from internal or domestic migration.
5.9 Domestic migration is harder to quantify than births, deaths or international migration. Although Stats NZ estimate its effects from year to year, it is only in the 5-yearly censuses that we get an accurate picture.
5.10 However, some of the key trends which we expect to continue are that, on a “net” basis, Auckland will continue to lose people to neighbouring regions such as the Waikato,22 and that this loss will be greater when there is housing pressure in Auckland.
Figure Error! No text of specified style in document.-8: Auckland Population Flows. Source: RCG
5.11 This is certainly the case at the moment: Auckland is building fewer than 10,000 homes a year, but is targeting 13,000 a year under the Auckland Plan, and needs to build 15,000 a year based on current population growth levels. This is adding to an Auckland housing undersupply which has been building since at least 2008.
5.12 The result has been a house price boom which started in Auckland and spread around the rest of the country, and more demand for homes in places like Hamilton and Tauranga, which provide more affordable housing than Auckland.
21 https://www.immigration.govt.nz/about-us/media-centre/news-notifications/skilled-migrant-category-changes 22 This trend has been in place since the late 1990s. See https://www.greaterauckland.org.nz/2014/10/09/northward- drift-no-more/
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5.13 However, there would still be strong growth in Hamilton even if Auckland was able to fully meet its housing need. Hamilton has grown significantly over many decades, and is expected to continue this growth. This is illustrated by the projections later in this chapter.
Declining Household Sizes
5.14 Another driver of new housing demand is the long-term, internationally recognised shift towards fewer people per household. This arises in part due to people having fewer children, but more due to people living longer – most of the growth is in “empty nester” households.
5.15 However, places like Auckland and Hamilton have bucked the trend in recent years – between the 2001 and 2013 censuses, Auckland’s average household size stayed flat at 3.0 people per household, and Hamilton’s stayed flat at 2.8. We view the Auckland result as being evidence of the city’s struggle to keep up with its housing needs over the long term. The Hamilton picture may be more complex, but is at least in part a reflection of these same issues.
5.16 For the Waikato district, though, the average household size fell from 3.0 to 2.9 between 2001 and 2013. For the Waipa district, the average household size fell from 2.8 to 2.7.
5.17 Over the long term, these demographic trends are likely to mean that household growth (and demand for housing) is faster than population growth. This is also reflected in Stats NZ projections.
Stats NZ Projections
5.18 Stats NZ produces a wide range of projections – for both population and households, and at the national, local and even area unit level. For this report, we focus on their subnational population projections, which were released in February 2017.23
5.19 These show growth occurring in Hamilton, as well as in the Waikato and Waipa districts. Figure Error! No text of specified style in document.-9 below shows the three sets of projections for Hamilton City:
23 http://www.stats.govt.nz/browse_for_stats/population/estimates_and_projections/SubnationalPopulationProjections_HOTP2013 base-2043.aspx
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Figure Error! No text of specified style in document.-9: Stats NZ Population Estimates and Projections for Hamilton. Source: RCG, Stats NZ
5.20 Based on the latest ‘medium’ projections from Stats NZ, Hamilton City will have a population of 224,800 people by 2043. Under the ‘high’ projection, the figure would be 250,400, and under the ‘low’ projection it would be 199,300.
5.21 The Waikato and Waipa districts are also projected to grow strongly. Based on ‘medium’ projections, the Waikato district’s population will grow from 66,500 in 2013 to 101,700 in 2043. Waipa’s population will grow from 48,700 in 2013 to 65,900 in 2043. On a percentage basis, Waikato is expected to grow at roughly the same rate as Hamilton City, whereas Waipa is somewhat slower.
5.22 Stats NZ’s subnational household projections are now somewhat out of date – they are based on an earlier set of population projections than the ones above. They will be revised in December 2017, and the ‘medium’ projection is likely to be revised upwards.
5.23 However, the existing household projections are still useful as an indication of potential housing demand. Based on the ‘medium’ projections:
• Hamilton is expected to add 23,600 households between 2013 and 2038, or 948 a year on average; • Waikato is expected to add 10,800 households between 2013 and 2038, or 432 a year on average; • Waipa is expected to add 5,800 households between 2013 and 2038, or 232 a year on average.
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5.24 We see these projections as being conservative, especially in the short to medium term. As noted above, they are likely to be revised upwards in December 2017. Furthermore, household numbers are likely to grow faster in the early years of the 2013-2038 period than in the later years, as our ageing population means that the rate of growth will slow over time.
5.25 Looking at Stats NZ’s ‘high’ projections for the 2013-2023 period, Hamilton is expected to add 1,320 households a year, Waikato 610 households a year, and Waipa 380 households a year.
NIDEA Projections
5.26 The National Institute of Demographic and Economic Analysis (NIDEA) has also produced several reports with projections for Hamilton and the Waikato. These were last updated in November 2016, with population and household projections at the ‘area unit’ level.24
5.27 Looking at NIDEA’s ‘medium’ projections for the 2013-2031 period, Hamilton is expected to add 1,427 households a year, Waikato 644 households a year, and Waipa 509 households a year.25
5.28 This implies an even higher level of growth than the Stats NZ ‘high’ projections, due to NIDEA using different assumptions about household types.
5.29 In our view, Hamilton is likely to stay on a medium/ high growth track for the foreseeable future. It will take many years for Auckland to make inroads into its housing shortage, and in the meantime the Waikato will be an attractive destination for new migrants and former Aucklanders.
Housing Demand and Supply
5.30 Councils across New Zealand use a range of approaches for looking at housing demand and supply. However, building consents are a very common measure of housing supply, as they are nationally consistent and long-term data is available.
5.31 Figure Error! No text of specified style in document.-10 below shows the number of homes consented in the Hamilton, Waikato and Waipa districts, on a ‘moving annual total’ basis:
24 http://www.futureproof.org.nz/file/wise_2016update_cau_report_final_19-nov-2016.pdf 25 Table A3 of the NIDEA report linked above
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Figure Error! No text of specified style in document.-10: Homes Consented in the Future Proof Area. Source: RCG, Stats NZ
5.32 Building consents in all three territorial authorities are currently running at near-record levels. However, even this level of ‘supply’ is still struggling to keep up with demand. As shown in the graph above, consenting activity dropped off significantly in 2008-2012, and has only reached the current highs in the last 2 years or so. However, population growth continued throughout.
5.33 In the last 2-3 years, population growth has been even stronger. According to population estimates from Stats NZ, Hamilton’s population grew by 11,000 between June 2013 and June 2016. With an average household size of 2.8, this would require 3,929 new homes, or 1,300 a year. As shown in the graph above, Hamilton was well short of this in 2013-2016. However, the Waikato and Waipa districts seem to have come closer to balancing their ‘supply’ and ‘demand’.
5.34 Using the same kind of simple metrics, we estimate that Hamilton’s housing supply has fallen short of meeting demand for each year from 2008-2016 (although it exceeded demand over 2003-2007). Over the 2008-2016 period, we estimate that there was demand for 9,109 homes in Hamilton City, with only 7,081 homes supplied.
5.35 These figures assume a constant average household size, but assuming a declining household size would show an even higher demand result, and a larger undersupply.
House Prices and Affordability
5.36 Like most other parts of New Zealand, Hamilton house prices rose strongly in the years leading up to 2007, and dropped slightly in 2008. According to QV data, house prices grew modestly
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over 2009-2014, and have risen rapidly beginning in the second half of 2015. Only Auckland and Tauranga have seen faster growth over 2007-2016.
5.37 The average house value in Hamilton has now reached $537,000, up from $379,000 two years ago.26
5.38 Although many of the factors driving this house price growth are national (low interest rates, record migration, rising construction costs etc), we believe that Hamilton’s proximity to Auckland, and relatively affordable housing compared to the larger city, are also major factors.
5.39 However, affordability is a growing issue, especially for Hamiltonians who have seen house prices increase dramatically in the last two years, with incomes not rising to match. According to Interest.co.nz, Hamilton’s ‘median multiple’ – the ratio of median house prices to median household incomes – now sits at 6.34, higher than the New Zealand average of 6.21 and all other cities except Auckland and Tauranga.27
5.40 These issues will be addressed in more detail by the Hamilton City Council this year, as the recently signed Housing Accord is aimed at increasing housing supply and improving affordability in the city.
5.41 The Housing Accord aims to deliver 1,300 sections and dwellings consented in 2017, with 1,400 in 2018, and 1,500 in 2019. This will require further growth in consenting activity, to record levels over the next few years.
5.42 The Housing Accord affirms that housing supply and affordability are key issues in Hamilton, and require short term action. Hamilton City Council should be looking at ways to meet the shortfall now.
5.43 In the last 10 years, growth has been concentrated in the northeast – Rototuna and Flagstaff – but these areas are getting closer to reaching capacity. Most of the major subdivisions are close to completion, with the main exception being land around the proposed Rototuna town centre, owned by the Kimpton family. Providing for future growth will require action in growth nodes across the city, including Ruakura, Rotokauri, Peacocke and elsewhere – potentially including Te Awa Lakes.
5.44 Te Awa Lakes is well suited to new housing, being close to employment nodes such as Te Rapa and Horotiu (including the sub-regional centre at The Base), and close to Horotiu Primary School.
26 Data from https://www.qv.co.nz/property-trends/residential-house-values, for May 2015 compared with May 2017 27 Data from http://www.interest.co.nz/property/house-price-income-multiples, for May 2017
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6.0 Tourism in the Waikato
6.1 This chapter gives an overview of relevant tourism trends in Hamilton, the Waikato and New Zealand generally. This information is not specific to Te Awa Lakes, and it is included for background and as a starting point for our site-specific analysis in chapter 7.0.
Tourism and the New Zealand Economy
6.2 Tourism’s overall contribution to the New Zealand economy is recorded in the Tourism Satellite Account, published by Stats NZ. The latest account covers the year to March 2016. This outlines the following figures:
• Total tourism expenditure is $34.7 billion, with $20.2 billion of that from domestic tourism; • International tourists spent $14.5 billion, equal to 20.7% of New Zealand’s total exports of goods and services. Tourism was the country’s largest export earner, beating out dairy products; • Tourism’s ‘direct’ contribution to GDP was $12.9 billion, or 5.6% of total GDP; • Tourism had a further ‘indirect’ GDP contribution of $9.8 billion, or 4.3% of GDP. This covers value added further up the value chain as a result of tourist purchases – for example, when a tourist buys a retail product, the retailer’s value added is a ‘direct’ contribution to GDP, and the value added by the wholesaler and manufacturer is an ‘indirect’ contribution. • Tourism employs 188,136 people, 7.5% of the nationwide total. 6.3 Tourism cuts across a number of industries, and the ‘direct’ contribution to GDP is the preferred measurement when comparing to more traditional industries such as agriculture. ‘Indirect’ contributions can be thought of as flow-on or multiplier effects.
Forecasting Tourism Spending
6.4 Forecasting tourism spending growth is extremely difficult. The industry is prone to upturns and downturns, and spending is particularly affected by the strength of the dollar. Over the long term, upturns and downturns should cancel out to some extent, so that a smoother rate of growth can be assumed.
6.5 The government has produced regional tourism forecasts in the past, but now forecasts are only available at the New Zealand level. The latest MBIE forecasts assume that international tourism spending will grow at an annual rate of 5.3%-6.7% in the following five years,28 which is as far out as the forecasts go.
28 http://www.mbie.govt.nz/info-services/sectors-industries/tourism/tourism-research-data/international-tourism- forecasts/2017-2023-forecasts
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6.6 Like other tourism data, the MBIE forecasts are on a nominal basis, so include an inflation component. We expect this is assumed to be 2%, although this is not made explicit in the current forecasts. As such, ‘real’ growth is forecast to be in the 3%-5% range.
6.7 The forecasted growth rates would have been seen as overly optimistic a few years ago. 2013 tourism forecasts showed growth in the 2-3% range, or 0%-1% ‘real’ growth (the forecasts assumed inflation to be 2%). Those forecasts completely failed to predict the huge upturn in the last several years.
6.8 Generally, the tourism sector remains very positive, and this is expected to continue. Tourism businesses are investing in new hotels and facilities, capacity is being added to airports, and airlines have also been adding seat capacity on major routes. One of the main emerging issues is a shortage of accommodation in Auckland, Queenstown and other tourism hotspots.
The Commercial Accommodation Monitor
6.9 The Commercial Accommodation Monitor is a reliable source of tourism information, which records the number of “guest nights” stayed by guests in commercial accommodation facilities. It is a good indicator of tourism activity, although it is less useful for areas where most visitors do not stay overnight, or where they stay with friends or relatives.
The Waikato RTO
6.10 Regional Tourism Organisations (RTOs) are the tourism marketing entities for different parts of New Zealand. They are generally funded by local councils, along with some support from the tourism industry. In many cases, tourism data is available at the RTO level, even if it is not available for individual council areas.
6.11 The Waikato RTO consists of the Future Proof sub-region (Hamilton, Waikato and Waipa), plus the Waitomo, Otorohanga, Matamata-Piako and South Waikato districts.29
6.12 In the year ended March 2017, there were 1.40 million guest nights in the Waikato RTO, with Hamilton City accounting for just over half of these. Hamilton also had much higher occupancy than the RTO average, at 64.9% vs 42.6% for the RTO. The figures for each territorial authority in the RTO are shown in
6.13 Figure Error! No text of specified style in document.-11:
29 Other parts of the Waikato Region fall into different RTOs, e.g. the Thames-Coromandel and Hauraki districts (making up the Coromandel RTO), and the Taupo district (making up the Lake Taupo RTO).
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Territorial Authority Establishments Guest nights Occupancy (%) Average Stay (days)
Waikato 20 171,972 31.4% 2.24 Matamata-Piako 11 88,138 48.8% 1.79 Hamilton City 52 756,695 64.9% 1.86 Waipa 21 165,832 26.1% 1.81 Otorohanga 8 31,913 16.6% 1.39 South Waikato 9 43,916 36.2% 1.70 Waitomo 19 146,030 31.6% 1.58 Total, Waikato RTO 140 1,404,496 42.6% 1.84
Figure Error! No text of specified style in document.-11: Waikato RTO Accommodation for the Year Ended March 2017. Source: Commercial Accommodation Monitor 6.14 As shown in
6.15 Figure Error! No text of specified style in document.-11 above, the Waikato and Waipa districts are much smaller accommodation markets than Hamilton. Hamilton City had a total of 757,000 guest nights for the year ended March 2017, whereas Waikato had 172,000 and Waipa had 166,000.
6.16 In total, there were 38.4 million guest nights across New Zealand in the year ended March 2017. The Waikato RTO has 7.7% of New Zealand’s population, but just 3.7% of its guest nights. This suggests plenty of room for growth, if the Waikato is able to grow its tourism and accommodation offering.
Overall Guest Night Trends
6.17 The Commercial Accommodation Monitor shows that guest nights in Hamilton have grown strongly in recent years, and are currently at record levels:
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Figure Error! No text of specified style in document.-12: Moving Annual Total (MAT) Guest Nights in Hamilton City. Source: Commercial Accommodation Monitor 6.18 Figures for the Waikato and Waipa districts are also at or close to record levels. For the Future Proof sub-region as a whole, and for the Waikato RTO, guest nights are at record levels.
6.19 Information on ‘guest origin’, i.e. whether the accommodation guests are domestic or international, is only available at the RTO level. As shown in Figure 6.3 below, most guest nights in the Waikato RTO are from domestic guests:
Figure Error! No text of specified style in document.-13: Domestic and International Guest Nights in the Waikato RTO. Source: Commercial Accommodation Monitor
6.20 The proportion of international guests was 18% in 2000, climbed to 26% by 2006, and then fell back to 19% over 2009-2010. The proportion has now returned to 26%, with domestic and international guest nights rising at approximately the same rate.
6.21 By comparison, international guests account for 43% of all guest nights across New Zealand. As such, the Waikato RTO has an even lower share of international guest nights than it does of overall guest nights.
6.22 Hamilton may well be able to improve its popularity with international guests in the future, especially given its proximity to Auckland and as a base for Waikato tourism attractions.
Occupancy Rates
6.23 Occupancy levels are much higher in Hamilton City than in other parts of the Waikato RTO, at 64.9% for the year ended March 2017 (a record for the city). This compares with 31.4% for Waikato and 26.1% for Waipa, for example. As such, Hamilton is much more likely to see further accommodation development than the surrounding districts.
6.24 Hamilton’s occupancy rate for the year ended March 2017 was higher than most parts of New Zealand, and compares to other areas as follows:
• Wellington City 72.9%;
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• Auckland 67.7%; • Queenstown 62.6%; • Christchurch 55.0%; • Tauranga 52.0%; • Rotorua 46.4%; • Taupo 41.4%. 6.25 However, these occupancy rates can be misleading by themselves – they tend to differ substantially between different types of accommodation. They are generally highest for hotels, and very low for holiday parks (campgrounds etc). As such, areas with a high proportion of holiday parks tend to show lower occupancy rates.
6.26 Occupancy rates for hotels, as distinct from other types of accommodation, is only available at the RTO level. For the year ended March 2017, the Waikato RTO had hotel occupancy of 60.4%, below the New Zealand average of 68.7%.
6.27 Hamilton has more than three quarters of the Waikato RTO’s hotel supply, so an educated guess would be that Hamilton hotels have occupancy rates of around 65%.
6.28 Hotel occupancy for the year ended March 2017 varied quite significantly between different RTOs. Auckland (82.4% occupancy), Queenstown (80.1%) and Wellington (78.8%) are all experiencing hotel shortages, leading to new hotels being developed in all three cities. For many parts of the country, occupancy rates were below 50%, well below the level needed for new hotel development.
6.29 In our view, Hamilton is likely to see additional hotels built in the future, with the city having good access to Auckland Airport (the main hub for international flights in and out of New Zealand), and Waikato tourism drawcards such as Mystery Creek, Matamata or Waitomo.
6.30 Hamilton will also benefit from its proximity to Auckland – a growing region of 1.6 million people. Auckland is a major source of domestic visitors to Hamilton, both for day trips and overnight stays. Based on Monthly Regional Tourism Estimates data, Auckland visitors spend $300 million a year in the Waikato RTO.
Regional Tourism Estimates
6.31 Monthly Regional Tourism Estimates use EFTPOS data to estimate tourism spending at the RTO level, for both domestic and international visitors and across a range of spending categories. These estimates exclude GST and are in ‘nominal’ dollars.
6.32 The Regional Tourism Estimates for the Waikato RTO are shown in the two graphs and table on the following page:
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Figure Error! No text of specified style in document.-14: Domestic Visitor Spending in the Waikato RTO. Source: MBIE, RCG
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Figure Error! No text of specified style in document.-15: International Visitor Spending in the Waikato RTO. Source: MBIE, RCG
Spending Category Domestic International Total Accommodation $49.4 $22.3 $71.6 Culture, Recreation $57.0 $51.7 $108.7 Food & Beverage Services $146.6 $64.4 $211.0 Transport $81.8 $21.2 $103.0 Other $106.8 $53.1 $159.9 Retail - Food $133.8 $21.3 $155.1 Retail - Fuel & Automotive $152.3 $46.3 $198.6 Retail - Other $329.0 $65.2 $394.2 Total $1,056.7 $345.6 $1,402.3 Figure Error! No text of specified style in document.-16: Visitor Spending in the Waikato RTO ($m, Year Ended Mar 2017). Source: MBIE, RCG
6.33 Most tourism spending in the Waikato RTO is by domestic visitors, and this has now reached $1.06 billion a year. International visitors are a small but fast growing market, with spending now at $346 million a year.
6.34 Also evident in these graphs is the low share of spending that goes to accommodation providers. This accounts for 4.7% of domestic visitor spending in the Waikato RTO, and 6.5% of international visitor spending. By comparison, the nationwide figures are 8.1% and 12.9% respectively.
6.35 As noted earlier, the Waikato RTO has 7.7% of New Zealand’s population, but just 3.6% of its guest nights. The RTO captures 7.0% of domestic visitor spending across New Zealand, and 3.1% of international visitor spending.
Hamilton Hotel Demand Assessment
6.36 The Stafford Group carried out an analysis of Hamilton accommodation in 2016.30 Based on this report, tourism accounts for 4.5% of Hamilton’s GDP, contributing $320 million to the economy and accounting for 8.2% of employment.
6.37 The report points to Hamilton’s range of events venues, and its “strategic North Island location” for people in the Waikato and surrounding regions. “Hamilton is in a very fortuitous position, being geographically the epicentre of a tourism triangle, linking Auckland with Waitomo Caves and the Hobbiton”. We agree with these points, and have made similar ones above.
6.38 The Stafford Group also outline growth factors for Hamilton tourism, including “visitor attractions currently being planned and developed by groups such as the Perry Foundation… which should be a drawcard for families and corporates”.
6.39 One insight from the report is that some visitor types are much more high-yielding: for example, convention delegates spent an estimated $509 per night they stayed in the Waikato
30 “Hamilton Hotel Demand Assessment”, The Stafford Group, August 2016
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(2.9 nights on average). The Stafford Group argue that Hamilton’s lack of high-quality accommodation (e.g. 4+ star hotels) hampers its ability to capture high-yielding visitors, and that there could therefore be substantial flow-on benefits from growing this accommodation supply.
6.40 The Stafford Group show three forecast scenarios for guest night growth in Hamilton over 2017-2016. These show guest nights at 635,800 in 2016, and ranging between 698,800 and 980,000 in 2026.
6.41 In fact, guest nights reached 732,400 in 2016, up 8.7% on the year before. There seems to be an error in The Stafford Group’s forecasts, as Figure 2 of their report does show the correct figure of 673,900 guest nights for 2015, higher than the 2016 forecast.
6.42 Notwithstanding the above, The Stafford Group’s forecasts show compound annual growth of 0.9% in their “low growth scenario”, vs 2.3% in the ‘medium’ and 4.4% in the ‘high’ scenario.
6.43 Guest nights grew at 5.6% in 2014, 6.1% in 2015 and 8.7% in 2016, so the tourism sector certainly does seem to be tracking along a ‘high’ path at present. Of course, tourism is cyclical and these growth rates could change.
6.44 Based on The Stafford Group’s forecasts, they expect that Hamilton could support additional hotels by 2019/ 2020. This would add to the city’s current accommodation stock of 1,750 rooms (or 1,950 rooms according to the Commercial Accommodation Monitor).
6.45 Importantly, The Stafford Group also note that only a small fraction of Hamilton visitors stay in commercial accommodation. Section 3.5.2 of their report estimates that only 22% of the nights stayed in Hamilton are in commercial accommodation. If we also consider that some visitors to the city are on day trips or passing through without spending the night, commercial accommodation in Hamilton has an even smaller importance to the city’s tourism sector.
Hotel Demand in Other Cities
6.46 A major research report was commissioned by the government and other tourism entities in 2016.31 It aimed to forecast hotel demand and supply in Auckland, Rotorua, Wellington, Christchurch, and Queenstown for the next decade.
6.47 They noted that “exceptionally strong growth in hotel demand in the past three years combined with minimal change in new hotel inventory (supply) has resulted in a critical shortage of hotel rooms in the five focus regions during high demand periods”.
6.48 The high occupancy rates was “driving significant increases in room prices”, and “forecasts suggest that the hotel room shortage will become more severe over the next 10 years”.
6.49 On the demand side, the report “estimated that unconstrained demand for hotel room nights across the five focus regions will increase from 5.9 million in 2015 to 8.7 million by 2025”. The increase is primarily driven by international guests.
6.50 The report noted that “hotel supply is not expected to keep pace with demand over the next 10 years”, based on current hotel projects expected to be completed by 2020, and “historical growth rates in hotel capacity” for the 2021-2025 period.
31 “Regional Hotel Market Analysis & Forecasting”, Collies/ Fresh Info Co, May 2016
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6.51 The reports notes that “The expected shortfall is greatest in Auckland where up to 4,300 new hotel rooms will be required over the next 10 years but only 2,518 are expected to be built”.
6.52 Hamilton is not one of the “five focus areas” covered in the report, which focuses on the largest tourism/ accommodation markets. However, in our view, there is an opportunity for Hamilton to attract extra tourism and accommodation, through capturing ‘overflow’ from the Auckland market.
6.53 Anecdotally, this already seems to be happening to some extent. Hamilton has seen strong occupancy growth in the last six months. During major events such as the Adele concerts in March 2017, Auckland has had virtually no spare accommodation. Waikato Chamber of Commerce chief executive William During was paraphrased as saying that “visitors were increasingly using Hamilton as a base over Auckland due to affordability and overloaded Auckland accommodation”.32
6.54 Dean Humphries of Colliers noted in early 2016 that “The Auckland hotel market is running at capacity… therefore, there is huge opportunity for the spill over to be absorbed by satellite cities including Hamilton… for tourists who simply can't find accommodation in Auckland”.33
Cycle Tourism
6.55 Cycle tourism is also a growing part of the New Zealand tourism sector, with Ngā Haerenga, New Zealand Cycle Trail having been funded by the government and regional partners since 2009.
6.56 An estimated 1.3 million people used the 22 “Great Rides” of the New Zealand Cycle Trail in 2015, with 13.5% of those being international visitors. Economic benefits were estimated at $37.4 million, and social benefits at a further $12 million.34
6.57 The Waikato River Trail (southeast of Cambridge, running from Pokaiwhenua Bridge in the north to Atiamuri in the south) was used by an estimated 25,833 people in 2015, generating revenue of $906,000 from domestic and $245,000 from international users.
Summary
6.58 For the year to March 2016, tourism’s overall contribution to the economy was:
• Tourist spending of $34.7 billion, with $14.5 billion of that from international tourism; • A ‘direct’ GDP contribution of $12.9 billion, 5.6% of total GDP; • 188,136 people employed, 7.5% of the nationwide total; • New Zealand’s largest export earner, beating out dairy products; • Other industries which supplied the tourism sector had GDP of $9.8 billion. This can be thought of as flow-on or multiplier effects from tourism.
32 http://www.stuff.co.nz/entertainment/music/90610108/adele-is-coming-to-new-zealand-and-shes-bringing-the-chaos 33 www.stuff.co.nz/business/industries/76128855/bumper-year-for-hotel-sector-in-2015-sees-11-hotels-sell-for-290m 34 http://www.mbie.govt.nz/info-services/sectors-industries/tourism/documents-image-library/folder-nga-haerenga-new-zealand- cycle-trail-nzct/NZ-cycle-trail-evaluation-report-2016.pdf
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6.59 Tourism spending in the Waikato RTO is at record levels:
• Most tourism spending is by domestic visitors, and this has now reached $1.06 billion a year (with $300 million of it coming from Auckland). • International visitors are a small but fast growing market, with spending now at $346 million a year. • Spending on accommodation is a relatively low share of the figures above. • The Waikato RTO has 7.7% of New Zealand’s population, but captures just 7.0% of domestic visitor spending, and 3.1% of international visitor spending. • Generally, the New Zealand tourism sector has been very positive in the last few years, and this is expected to continue. Investment in hotels, airports, airlines and other tourism businesses has risen as a result. • At the New Zealand level, MBIE forecasts that “real” international tourism spending will grow by 3%-5% per annum in the next five years.
6.60 “Guest nights” are the number of nights stayed in commercial accommodation by visitors. For example, a couple staying in a hotel for two nights accounts for four guest nights. We make the following comments on guest night statistics:
• Guest nights in Hamilton and the Waikato RTO are at record levels (respectively 757,000 and 1.40 million for the year ended March 2017); • The Waikato RTO has 7.7% of New Zealand’s population, but just 3.6% of its ‘guest nights’, and an even smaller share of international guest nights; • This suggests plenty of room for growth. Hamilton has good access to Auckland Airport, Waikato tourism drawcards, and 1.6 million Aucklanders; • The average occupancy rate for Hamilton accommodation providers for the year ended March 2017 was 64.9%, a record for the city and above the New Zealand average; • Hamilton hotels are likely to have average occupancy of around 65%, slightly below the New Zealand average of 68.7%; • By comparison, Auckland, Queenstown and Wellington are all experiencing hotel shortages with around 80% occupancy. New hotels are being developed as a result, but the cities may be missing out on tourism dollars in the meantime.
6.61 According to The Stafford Group’s 2016 report on Hamilton accommodation:
• Tourism contributes $320 million to the Hamilton economy, 4.5% of the total. It accounts for 8.2% of employment; • Convention delegates are ‘high yielding’, spending $509 per night on average; • Hamilton’s lack of high-quality hotels limits its ability to capture such visitors, and there could therefore be substantial flow-on benefits from growing this accommodation supply; • Hamilton guest nights are forecast to grow by 2.3% annually in the ‘medium growth’ and 4.4% in the ‘high growth’ scenario;
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• We note that guest nights have exceeded the ‘high’ growth level for the last three years, although tourism is cyclical and these growth rates could change; • The Stafford Group’s forecasts expect that Hamilton could support additional hotels by 2019/ 2020; • Only a small fraction of 22% of ‘visitor nights’ in Hamilton are stayed in commercial accommodation; • We note that many visitors do not stay overnight at all, meaning that Hamilton accommodation is (relatively) unimportant for the city’s tourism sector. 6.62 Another major research report covered accommodation demand and supply in Auckland, Rotorua, Wellington, Christchurch, and Queenstown. It found that there was likely to be strong growth in “unconstrained” demand in these cities over the next decade, but that supply was unlikely to keep up.
6.63 The forecast accommodation shortage, which is expected to be most severe in Auckland, could lead to overflow with cities such as Hamilton benefiting as a result. Anecdotally, this seems to already be happening at times.
6.64 Cycle tourism is a small but growing part of the sector:
• 1.3 million people used the 22 “Great Rides” of the New Zealand Cycle Trail in 2015, with 13.5% of those being international visitors. • Economic benefits were estimated at $37.4 million, and social benefits at a further $12 million. • The Waikato River Trail was used by 25,833 people in 2015, generating revenue of $906,000 from domestic and $245,000 from international users.
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7.0 Te Awa Lakes Tourism Effects
7.1 This chapter of our report assesses the economic effects of the tourism-related components of Te Awa Lakes: the adventure park and the accommodation. The retail at Te Awa Lakes will also be supported in part by tourism, but this is considered separately in chapter 8.0.
Tourism Benchmarks and Visitor Numbers
7.2 Although Te Awa Lakes Adventure Park will be a unique facility, and the mix of activities is still to be confirmed, it is possible to look at some other tourist facilities as benchmarks.
7.3 As one indication of tourism growth in the Waikato region, visitor numbers to the Hobbiton attraction have grown dramatically: 33,000 in 2011, 232,000 in the year to March 2014 and 360,000 in the year to March 2015.35 Visitor numbers have now grown to 468,000 for the year to March 2016.36 The vast majority of these visitors are international. This will have been a major factor in tourism growth across the Waikato RTO.
7.4 Similarly, Waitomo Caves attract more than 500,000 visitors a year, a figure which has increased by 100,000 in the last decade.37 The majority of visitors are international.
7.5 The ‘themed’ part of the Hamilton Gardens attracts 350,000 visitors a year.38 However, it is unclear whether this figure includes Hamilton locals, who would make up a large share of overall visitors to the gardens.
7.6 Rainbow’s End, located in Manukau, Auckland is New Zealand’s largest theme park. It has grown from around 260,000 visitors in 2010 to 400,000 visitors today, with 270 staff (60 of them full time).39
7.7 Many of New Zealand’s other major tourism attractions receive 200,000-400,000 ‘visitors’ a year, figures which generally include locals as well as domestic and international tourists.
The Adventure Park at Te Awa Lakes
7.8 The Adventure Park would be a ‘gateway’ attraction for the Waikato, providing new activities and facilities for the region. The exact nature of these uses is yet to be confirmed, but is likely to include 5-10 activities, such as:
• Cable tow water skiing/wakeboarding; • Aqua golf/mini golf; • Climbing frames; • Electric go karting;
35 http://insights.nzherald.co.nz/article/new-zealand-regional-economy 36 https://nzbusiness.co.nz/article/no-gain-without-pain 37 http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11828398 38 http://www.stuff.co.nz/travel/destinations/nz/90021234/mayor-proposes-fee-for-nonresident-visitors-to-the-themed- hamilton-gardens 39 “Te Awa Lakes Request for Plan Change” report, Bloxam Burnett & Olliver, May 2017
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• Ropes course and zip lines; • ‘Aqua Park’ amusements; • ‘Slip and fly’ water slides. 7.9 The Perry Bike Park is already established on site, and a neighbouring site is home to Hinterland Adventures which offers paintball, clay bird shooting, laser tag and archery.
7.10 Te Awa Lakes is very well positioned to capitalise on cycle tourism. The development sits alongside ‘Te Awa – the great New Zealand river ride’, which will eventually run from Ngaruawahia to Cambridge (close to the beginning of the Waikato River Ride mentioned in section 6.64).
7.11 Based on the benchmarks above, and subject to the overall activity mix, we assume that the Adventure Park could eventually have 200,000 customers per year. The potential 190,000 guest nights estimated below will certainly help to support these levels of activity.
Accommodation at Te Awa Lakes
7.12 Te Awa Lakes is planned to eventually have up to 400 accommodation units, although we expect that this will take some time to develop. The offering will likely comprise several operators, potentially including hotel, motel and serviced apartment accommodation.
7.13 400 accommodation units at Te Awa Lakes, with 65% occupancy and an average of two guests per occupied unit, could generate 190,000 guest nights per year.40 As noted above, it will take time to reach this level of activity – accommodation is likely to be developed in stages, and could potentially reach the 400 units over the next decade.
Te Awa Lakes Tourism Effects
7.14 In general terms, the Adventure Park would mean:
• More activities available for visitors who are already planning on coming to Hamilton; • An increase in ‘day’ visitors to Hamilton, e.g. people coming from the wider region, Auckland, Bay of Plenty etc; • An increase in ‘overnight’ visitors to Hamilton and the Waikato, many of whom currently bypass the city; • Economic value added through spending at the park itself, as well as in the wider city and region from visitors staying longer. 7.15 Hamilton residents will be important customers for the Adventure Park, but they are not ‘visitors’ in the tourism sense. Local residents are generally excluded in studies of economic effects, as most of the money they spend is essentially being redistributed from elsewhere in the area.
40 By comparison, Hamilton accommodation providers had average occupancy of 63% in 2016, and 1.7 guests per occupied unit. Te Awa Lakes will be targeted more at families and leisure travellers, and is likely to have a higher number of guests per occupied unit.
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7.16 Put simply, the economic value of the Adventure Park comes from more tourists to Hamilton (and the Waikato), staying longer. This means that accommodation is key to helping the Adventure Park achieve maximum economic impact.
7.17 Tourism economic impact studies normally focus on facilities which are already established (or events which have already happened). Given that Te Awa Lakes is not yet established, there is of course greater uncertainty around its effects. However, our estimates below are based on our previous work with various tourism operators across New Zealand, and information from our database. We have aimed to be conservative with them.
7.18 As outlined above, we estimate that Te Awa Lakes could eventually have 200,000 customers per year for the Adventure Park, with accommodation accounting for 190,000 guest nights per year. There will be substantial overlap between these two groups, especially when we restrict our focus to ‘tourists’ and visitors rather than Hamilton locals.
7.19 The Te Awa Lakes adventure park will boost growth in both day and overnight visits to Hamilton, for both domestic and international visitors. For the purposes of this report, we assume the total increase in spending from all these visitors is equivalent to 20,000 extra international visitor nights a year, at the national average of $183 per visitor night.41
7.20 This gives a total assumed spending boost of $3.7 million a year, which we believe to be a very conservative estimate of the tourism impact from the adventure park.
7.21 Guests in Te Awa Lakes accommodation will also spend tens of millions of dollars in Te Awa Lakes, Hamilton and the Waikato. As one indication of the potential spending, 190,000 guest nights multiplied by $183 average spending per night would yield $34.2 million in spending, conservative given that visitors staying in commercial accommodation tend to be higher- spending. Not all of this spending will be ‘new to the region’ as a result of Te Awa Lakes – e.g. some of it will come from visitors simply staying longer in the Waikato, or who would otherwise have stayed elsewhere in the region. Even so, the ‘net’ increase in spending is likely to be significant.
The Hamilton CBD
7.22 Tourism economic impact studies do not generally consider the costs of tourism, except for specific monetary costs (e.g. the costs of building a new facility, or hosting a particular event). Tourism costs are often subjective and difficult to quantify.
7.23 However, for this study we believe it is important to consider one potential ‘cost’, even with the above provisos. We have considered whether accommodation at Te Awa Lakes could have some effect on the CBD, e.g. a reduction in guest nights (and therefore tourism spending) for existing accommodation providers, or the potential for planned accommodation projects in the CBD to be delayed.
7.24 We recognise that the Hamilton City Council is aiming to revitalise the CBD, through a range of measures including focusing office and retail development there, encouraging residential intensification (apartments, terraces etc), and improving the public realm.
41 International Visitor Survey results for 2016, Stats NZ. Note the distinction between guest nights and visitor nights above – visitor nights include all nights stayed by visitors in New Zealand, whereas guest nights only includes nights stayed in commercial accommodation.
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7.25 The CBD is positioned at the top of the centres hierarchy, so also has the widest range of activities, and is a hub for tourist activity. Most of Hamilton’s accommodation is in or close to the CBD, and a range of tourist facilities are either in or in the fringe of the CBD. Tourists contribute to vibrancy and business success in the CBD, and the continued growth of the central city tourism industry should certainly be supported.
7.26 Overall, we support the proposed accommodation offering at Te Awa Lakes, of up to 400 units, for the following reasons:
• Accommodation at Te Awa Lakes will support planned investments in the Adventure Park; • Given that Hamilton only receives a small share of overnight visitors, and that few of those visitors stay in commercial accommodation, many of the ‘guest nights’ at Te Awa Lakes are likely to be new to the city rather than reallocated from existing providers; • Te Awa Lakes is likely to support different accommodation formats to what could realistically be provided in the CBD: low rise, resort-style accommodation rather than more intensive multi-storey buildings; • Te Awa Lakes could unlock further tourist activity in the Waikato region, and act as a regional base for visitors travelling to destinations such as Matamata and Waitomo. The CBD would struggle to fill this role; • The CBD is likely to attract different visitor markets: in particular, people who are visiting Hamilton for work, family or friends or central city events; • “Trade competition” between different operators and locations is generally considered to be positive (e.g. in a retail context), except where it leads to more significant flow-on effects; • Indeed, Hamilton and the Waikato compete with other parts of the country for a share of the tourism market. The Adventure Park (and its accommodation) will help the city do this more effectively. 7.27 In our view, accommodation at Te Awa Lakes will not compete with the Hamilton CBD to a large extent. Given that this is a new and increased accommodation supply, with different locational and amenity attributes to the CBD, our opinion is that the overall economic effects of accommodation units at Te Awa Lakes will be positive.
Summary
7.28 We make the following comments on the Adventure Park’s economic effects:
• The Adventure Park will be a ‘gateway’ attraction for the Waikato, providing new activities and facilities for the region; • It could eventually receive 200,000 customers a year, including locals as well as domestic and international tourists; • Economic benefits arise from attracting visitors from outside the local area – both those who would not have otherwise visited, and those who extend their stay as a result of the Adventure Park; • Visitors will spend money both in the Adventure Park itself, and in other parts of Hamilton and the Waikato due to staying longer;
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• Conservatively, we estimate that the Adventure Park could attract extra visitor spending of at least $3.7 million a year.
7.29 In summary, the Adventure Park would mean:
• More activities available for visitors who are already planning on coming to Hamilton; • An increase in ‘day’ visitors to Hamilton, e.g. people coming from the wider region, Auckland, Bay of Plenty etc; • An increase in ‘overnight’ visitors to Hamilton and the Waikato, many of whom currently bypass the city; • Economic value added through spending at the park itself, as well as in the wider city and region from visitors staying longer.
7.30 We also comment on the economic effects of Te Awa Lakes accommodation:
• Te Awa Lakes could have up to 400 accommodation units, generating 190,000 guest nights per year; • These guests could conservatively spend $34.2 million, spread across Te Awa Lakes, Hamilton and the Waikato; • Since few Hamilton visitors stay overnight, and fewer stay in commercial accommodation, much of this spending is likely to be new to the city; • This accommodation will not compete with the Hamilton CBD to a large extent. It will have a different pitch, offer and amenity, with low rise, resort-style accommodation. Given its transport links, it will appeal to regional visitors who are in the region to visit Matamata, Waitomo etc; • Accommodation will complement the Adventure Park itself, and help to ensure its success; • Overall, the net economic effects will be positive.
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8.0 Retail Demand
8.1 Under the proposed suite of planning rules, retail could be developed in the Te Awa Lakes Business Zone, and further retail potentially in the service centre area or Mixed Use zone. The developer has proposed a total cap on retail activity of 2,500 m2. Retail shops of less than 150 m2 would be a permitted activity, as for existing Business 6 zones.
8.2 In this chapter, we estimate the retail demand arising from households and visitors in Te Awa Lakes. We also comment on the effects of including retail in Te Awa Lakes, with regard to Hamilton City Council’s ‘Centres Assessment Report’ methodology.
Retail Demand from Households
8.3 We assume that there could eventually be 800-1,000 households living at Te Awa Lakes, and that they will have household incomes equal to the Hamilton City median ($64,000 as recorded in the 2013 census, very similar to the New Zealand median of $63,800).
8.4 Based on these figures, Te Awa Lakes households would be expected to spend the following on retail, if the site was fully developed as at 2016:
Store Type One Household 800 Households 1,000 Households ($) ($m) ($m) Food Retailing $9,217 $7.4 $9.2 Department Stores $1,522 $1.2 $1.5 Furniture, Flooring, Houseware etc $514 $0.4 $0.5 Hardware, Building & Garden Supplies $851 $0.7 $0.9 Recreational Goods $594 $0.5 $0.6 Clothing, Footwear and Accessories $1,080 $0.9 $1.1 Electronics and Appliances $679 $0.5 $0.7 Chemists, Other Stores $894 $0.7 $0.9 Food & Beverage Services $2,970 $2.4 $3.0 Total $18,320 $14.7 $18.3 Figure Error! No text of specified style in document.-17: Retail Spending from Te Awa Lakes Households. Source: RCG
8.5 We generally assume that spending increases by 1% per household per year in “real” terms, so the spending shown in Figure Error! No text of specified style in document.-17 would grow slowly over time.
8.6 Retail spending is split across various store types, as shown in Figure Error! No text of specified style in document.-17 above. The RCG Retail Sales Model does not cover service-oriented businesses such as real estate agents, hairdressers, gyms, childcare and so on, although of course these are also common in retail centres.
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Floor Space Demand
8.7 The RCG Retail Sales Model also estimates retail “floor space demand”. We assume that sales are split between large format retail (LFR) and smaller stores, and make further assumptions about the “sales per square metre” for each store type and format type, based on typical retailer sales performance.
8.8 In the table below, we look at “floor space demand” from Te Awa Lakes households:
One Store Type 800 Households 1,000 Households Household Food Retailing 0.79 632 790 Department Stores 0.43 348 435 Furniture, Flooring, Houseware etc 0.15 120 150 Hardware, Building & Garden Supplies 0.29 236 295 Recreational Goods 0.15 122 153 Clothing, Footwear and Accessories 0.22 176 220 Electronics and Appliances 0.07 54 68 Chemists, Other Stores 0.15 119 149 Food & Beverage Services 0.35 279 349 Total 2.61 2,087 2,609 Figure Error! No text of specified style in document.-18: Floor Space Demand from Te Awa Lakes households (in m2). Source: RCG
8.9 This table is based on typical “sales per square metre” ratios achieved by retailers, and on the typical split between LFR and small format retail for each store type.
8.10 If Te Awa Lakes was fully developed in 2016, households living there could support 2,609 m2 of retail floor space (assuming 1,000 households). This includes both LFR and small format retail. Figure Error! No text of specified style in document.-19 below shows the results for small format space only:
One Store Type 800 Households 1,000 Households Household Food Retailing 0.26 211 263 Department Stores 0.00 0 0 Furniture, Flooring, Houseware etc 0.02 17 21 Hardware, Building & Garden Supplies 0.03 26 32 Recreational Goods 0.05 43 54 Clothing, Footwear and Accessories 0.18 141 177 Electronics and Appliances 0.02 16 20 Chemists, Other Stores 0.15 119 149 Food & Beverage Services 0.35 279 349 Total 1.07 853 1,066 Figure Error! No text of specified style in document.-19: ‘Small Format’ Floor Space Demand from Te Awa Lakes households (in m2). Source: RCG
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8.11 In practise, many of these store types would be located in larger centres rather than Te Awa Lakes. We would expect the offering at Te Awa Lakes to be focused on ‘convenience’ store types – food retailing, food & beverage, as well as service-type businesses not included in the Retail Sales Model.
8.12 Overall, households living in Te Awa Lakes or the surrounding area could support say 500-1,000 m2 of convenience-type uses, including food retailers, F&B providers and service businesses.
Retail Demand from Visitors
8.13 Retail demand from visitors depends on a number of assumptions and factors. We expect that the existing service centre already picks up on some ‘tourist demand’, from drivers on their way to Hamilton or just passing through. Technically, spending is considered to be tourist spending if it involves New Zealand households travelling more than 40 km away from their ‘usual environment’ of home or work. As such, a large share of spending from long-distance trips is picked up in tourism figures.
8.14 We show current tourism spending figures for the Waikato RTO in chapter 6.0 of this report. However, these figures are for a somewhat different visitor profile than Te Awa Lakes would attract, including people on day trips or passing through the region, people visiting friends and family, etc.
8.15 Looking at more ‘dedicated’ destinations, such as Queenstown, gives a quite different picture. Most visitors to Queenstown are there as tourists, not visiting friends and family, and they are generally ‘higher yielding’ visitors who stay in commercial accommodation, do much of their eating in restaurants, etc.
8.16 In 2016, international visitors spent $1.4 billion in Queenstown, and accounted for 2.4 million guest nights. Domestic visitors spent $685 million and stayed for 1.1 million guest nights. As an indication of the spending potential in high-yield, tourism-oriented locations, we have divided the total tourism spending in Queenstown by these guest night numbers. This breaks down to:
• Accommodation spending per guest night averaging $79 for international and $71 for domestic tourists; • Food & beverage services spending per guest night averaging $146 for international and $89 for domestic tourists; • Food and drink retailing spending per guest night averaging $23 for international and $49 for domestic tourists; • Fuel and other automotive products spending per guest night averaging $29 for international and $23 for domestic tourists; • Other retail spending per guest night averaging $129 for international and $95 for domestic tourists. • Other (non-retail) spending per guest night averaging $171 for international and $315 for domestic tourists (note that these figures will be boosted by domestic flights, which are included in the spending) 8.17 Queenstown is of course a very different destination to Hamilton, but these figures do indicate the spending power of high-yield tourists, and the opportunities from capturing even a small
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share of these markets. Visitors who stay at Te Awa Lakes are likely to spend money in a range of places across Hamilton and the Waikato.
8.18 As per chapter 7.0, Te Awa Lakes could potentially have 400 accommodation units and 190,000 guest nights a year. If Te Awa Lakes was able to capture $30 of food & beverage spending per guest night and and $30 in retail spending per guest night, this could support $5.7 million in food & beverage sales and $5.7 million in other retail sales.
8.19 The indicative numbers above would support a cluster of retail stores and F&B providers, of around 1,700 m2 based on the typical ‘sales per square metre’ figures used in our model.
8.20 “Day” visitors to the Adventure Park would also help to support retail. This could include retail (e.g. a gift shop) and F&B within the park itself, as well as retail within the Neighbourhood Centre zone.
Retail Demand from Other Shoppers
8.21 Most of the demand for retail at Te Awa Lakes would come from households or visitors in the development (as well as passing traffic, with the existing service centre). However, retailers would also receive some support from Horotiu, workers in nearby industrial areas, etc. We have not attempted to quantify this.
Centre Assessment Reports
8.22 Under the Partly Operative District Plan, resource consent applications for retail and office activities generally need to include a Centre Assessment Report. These requirements are covered in Appendix 1 to the Plan, sections 1.2.2.19 and 1.3.3H.
8.23 The key questions for a Centre Assessment Report are the extent to which the activity:
• Avoids adverse effects on the vitality, function and amenity of the Central City and sub- regional centres that go beyond those effects ordinarily associated with competition on trade competitors. • Avoids the inefficient use of existing physical resources and promotes a compact urban form. • Promotes the efficient use of existing and planned public and private investment in infrastructure. • Reinforces the primacy of the Central City and the functions of other centres in the business hierarchy.
8.24 The information shall include:
• A summary of the methodology and data sources used to prepare the assessment. • The following comparative indicators on the current vitality, functions and amenity of the Central City and sub-regional centres for the activity and a summary analysis of discernible trends: • Retail expenditure patterns
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• Floorspace and activity mix • Employment by type • Pedestrian environment and flows • Parking and public transport services and connections • Retail and office demand and supply, including vacancy levels. • The existing and consented development located outside of the Central City and/or sub- regional centres which has been taken into account when assessing the potential adverse effects of the development. • Any external non-development factors such as macroeconomic trends or site specific factors that could influence the above indicators. • Information should be included to demonstrate the appropriateness of the timeframes used to demonstrate trends and future predictions. 8.25 We have considered the criteria above, and make the following comments. We believe our comments demonstrate the desirability of retail at Te Awa Lakes without the need for a separate Centre Assessment Report, although retail activities above the proposed 2,500 m2 cap should be subject to such a report.
8.26 In terms of potential adverse effects, the centre most likely to suffer impacts from retail at Te Awa Lakes is The Base. This is the closest centre – Chartwell and the CBD are much further away.
8.27 The Base is a very successful shopping centre. In terms of retail area, it is the largest centre in New Zealand with 85,000 m2 of floor space and 160 retailers. The Base is home to major tenants including Farmers, The Warehouse and Hoyts Cinemas.
8.28 The wider retail offering in Te Rapa (outside the sub-regional centre) also includes Kmart, Countdown and others. Overall, The Base and Te Rapa constitute a regionally or even nationally significant retail hub.
8.29 By comparison, retail at Te Awa Lakes would be limited to 2,500 m2, with individual shops less than 150 m2. It would have a “neighbourhood centre” zoning and focus, aiming at serving the everyday convenience needs of local residents and visitors.
8.30 The Base and Te Awa Lakes are vastly different in size and scope. Residents at Te Awa Lakes would continue to visit centres such as The Base (or the CBD or Chartwell) for most of their shopping needs, with Te Awa Lakes shops only having a limited offering.
8.31 As such, there is a negligible chance of Te Awa Lakes having significant adverse effects on The Base or any other centre.
8.32 In our view, providing for some retail in Te Awa Lakes will promote sustainable and efficient outcomes. Residents will be able to satisfy some of their everyday needs locally, without needing to drive to a more distant centre. Visitors will also be more likely to spend, as they can access some shops and services where they are staying. This will be an economic injection for Hamilton.
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Conclusions
8.33 Summarising the above, households living in Te Awa Lakes will spend across a range of store types, and in various locations.
8.34 Looking at their likely convenience spending, and the need for some non-retail service businesses, we estimate that households could support 500-1,000 m2 of retail space.
8.35 Based on our assumptions above, guests staying in Te Awa Lakes accommodation could support 1,700 m2 of space.
8.36 ‘Day’ visitors, passing traffic and other shoppers will also help to support the retail offering. Passing traffic already supports the existing service centre.
8.37 There is a negligible chance of Te Awa Lakes having significant adverse effects on The Base or any other centre.
8.38 Providing for 2,500 m2 of retail in Te Awa Lakes will promote sustainable and efficient outcomes.
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9.0 Response to Peer Review
9.1 Phil Osborne and Tim Heath of Property Economics provided a peer review on an earlier version of this report (version 4, dated May 2017).42 This chapter outlines our response to that review.
9.2 In section 1 of their review, Property Economics outline the Te Awa Lakes proposal, the objectives of RCG’s study and the approach we adopted, which is to separately review the different activities allowed or proposed for Te Awa Lakes: industrial, residential, tourism and retail.
9.3 Property Economics note that “the premises of the approach taken is considered appropriate… [it] should, in theory, provide the necessary assessment of the affected sectors to provide Council with a high-level understanding of the economic effects of the proposal”.
Industrial
Overall Demand and Supply
9.4 Property Economics note that “the question here is does the Hamilton (and wider Future Proof) market have enough identified capacity to meet expected future demand efficiently”.
9.5 From an overall supply and demand perspective, Property Economics note that “there is more than sufficient vacant industrial land to meet [the future demand] requirement as ‘face value’”.
9.6 We agree that the future demand/ supply provision is such that the removal of a potential 60 hectares at Te Awa Lakes (of which only 7 hectares can be developed at present, with another 23 hectares available after 2021 and the remainder only in the longer term) will not create a risk of undersupply.
9.7 Property Economics note that the Hamilton City Council has commissioned updated projections and analysis on the industrial market. We have liaised with Market Economics Ltd, who is carrying out this study, but the work is yet to be released and as such we have been unable to factor it into our work. We may be able to comment on the Market Economics work in the future if and when it is publicly released.
“Strategic” Locations, Efficiency and Agglomeration
9.8 Property Economics also make the important point that the location and characteristics of industrial land should be considered as well. That is, while there is sufficient industrial land supply in the sub-region, some areas are more ‘strategic’ or suitable / viable for industrial development than others. Removal of these ‘strategic’ sites could have a greater negative impact on economic opportunities, agglomeration etc than the removal of other non-strategic sites.
42 “Peer Review of Economic Effects of Te Awa Lakes Proposal”, Property Economics, code 51644.2 dated June 2017
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9.9 As such, Property Economics “expect an assessment of the strategic importance of this industrial land in the market context”.
9.10 Their review also hypothesises that Te Awa Lakes may be strategic for industrial due to “the Ports of Auckland and Fonterra Dairy Factory” anchoring the area, “strategic infrastructure proposed for this location”, and “agglomeration benefits through the clustering of industrial activities that service the wider North Island market”.
9.11 Our following comments represent our view on the “strategic” or otherwise nature of Te Awa Lakes as an industrial location.
9.12 Firstly, Property Economics refer to both Ports of Auckland and Fonterra as important anchors for the area. These activities are in two different “Strategic Nodes” as identified by Future Proof – Te Rapa North and Horotiu. However, we note in paragraph 2.3 that the two nodes “operate as a single node from an industrial location perspective”.
9.13 Paragraphs 3.18 to 3.21 of our report shows historical uptake of industrial land at 8 hectares/ year for Hamilton (or 18 hectares/ year for the sub-region), with a 2010 projection showing 805 hectares of uptake in the 50 years to 2061. The Regional Policy Statement provides 1,148 hectares in the seven “Strategic Industrial Nodes” alone, of which much is already zoned.
9.14 As such, while Te Rapa North is identified as a “strategic” location for industrial use, there is more than enough “strategic” land to accommodate future uptake for the next 50 years, even setting aside infill and intensification in existing industrial areas (which are not included as Strategic Industrial Nodes).
9.15 As laid out in chapter 2.0 of our report, there are also a variety of other industrial and non- industrial land uses in the Te Rapa North and Horotiu areas. The AFFCO plant, further away than Ports of Auckland, is still part of the Horotiu node and arguably has as much potential importance as Ports of Auckland and Fonterra: AFFCO is a very long-established business in the area, and has significant undeveloped landholdings there, as does Fonterra and indeed Ports of Auckland considering that the port expects to only develop their land over a number of years.
9.16 However, these three major industrial users are in fact quite widely separated from each other, with the vast majority of land in Te Rapa North and Horotiu not developed.
9.17 The number of industrial activities is likely to increase over time, e.g. in the Northgate Business Park where Ports of Auckland has bought land, and potentially with further development on Fonterra or AFFCO land.
9.18 Increasing industrial activity will help to create agglomeration benefits – higher economic efficiency arising from complementary activities clustering together, with transportation efficiencies, knowledge spillovers etc.
9.19 However, agglomeration benefits will develop wherever industrial activities cluster. In our view, the potential agglomeration benefits from industrial users beginning to cluster in Te Rapa North and Horotiu are likely to be lower than the potential benefits from other locations. We detail some of the reasons for this below.
9.20 All the major industrial nodes in Hamilton and the Future Proof area have good highway access, with many of them also having potential rail access.
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9.21 Te Rapa/ Rotokauri is by far the largest and most densely developed industrial node in the sub- region. Further development in this area, either greenfields or through more intensive use of existing developed areas, would be likely to yield the greatest agglomeration benefits.
9.22 Large agglomeration benefits would also be expected in Frankton, for similar reasons.
9.23 Ruakura is largely undeveloped, as for Te Rapa North/ Horotiu, but the concentrated land ownership, proximity to uses like the Waikato Innovation Park (within the Ruakura area) and University of Waikato (adjacent), mix of uses including residential, and a highway which runs alongside the precinct rather than bisecting it are all likely to favour agglomeration benefits.
9.24 Agglomeration benefits are important drivers of economic growth, although they are difficult to quantify except through very rigorous studies.
9.25 However, qualitatively, we can note that agglomeration benefits in Te Rapa North/ Horotiu would be future potential ones rather than near-term ones; and that it is uncertain that this location has greater potential than others, especially the existing developed areas where the bulk of industrial activity is occurring and will occur.
9.26 Te Rapa North and Horotiu are separated by the Waikato Expressway, which is likely to at least somewhat reduce the potential for agglomeration.
9.27 Furthermore, many of the industrial-zoned properties in Horotiu are adjacent to the North Island Main Trunk Line, potentially allowing rail access. Te Rapa North generally has less potential for rail access: Te Awa Lakes is far removed from the railway line, and Fonterra’s factory is also some distance from the line. However, properties around Onion Rd, including Fonterra-owned properties on the eastern side, could potentially have rail access in future. These properties are currently used for rural purposes.
9.28 Rail is likely to be a growing factor in future industrial and freight operations, especially with increasing congestion on the highway network, the rising costs to upgrade it and the need to reduce greenhouse gas emissions in the long term.
9.29 We assume rail access was a key factor in the location choices of Ports of Auckland and the Ruakura inland port, as rail freight has different characteristics to road freight and is well suited to transporting large volumes of goods to the sea ports of Auckland and Tauranga, where land is much more constrained and there are major drives to improve efficiency.
Residential
9.30 Property Economics note that “no attention has been applied to residential capacity provided for under the Hamilton City Plan”. This is correct as this was outside our brief.
9.31 Market Economics are currently carrying out a capacity study for the Hamilton City Council; as with the industrial work, we have liaised with them but the work is yet to be released. We may be able to comment on their work in the future if and when it is publicly released.
9.32 We understand that their work will distinguish between theoretical plan-enabled capacity and economically feasible/ likely capacity. This is an important distinction and a similar one was made during the process to create an Auckland Unitary Plan.
9.33 We have tried to avoid ‘doubling up’ on the Council-commissioned work for residential and industrial sectors, and as such have avoided going into detailed supply/ demand modelling.
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9.34 However, the existence of the Hamilton Housing Accord suggests that there is more to delivering housing than simply having a new District Plan. The council will need to maintain a supply pipeline of zoned and serviced land to avoid shortages, with all the negative consequences those entail.
9.35 We note that the Council is also seeking to intensify the existing city; this process is already occurring in some areas, and it will continue. The hope is that intensification will increase over time, which we support, but greenfields land will still be required.
9.36 Even in Auckland, a much larger and denser city with geography which favours intensification and fewer options for greenfields growth, the Unitary Plan is targeting 30%-40% of growth to be in greenfields areas.
9.37 The Council will be going through a range of processes in the next few years to ensure that it is enabling housing supply, including identifying Special Housing Areas and so on.
9.38 Again, it is outside our brief to assess citywide housing demand or supply. We have mainly noted the strong demand (which is likely to be lasting) and that supply so far has not been able to keep up.
9.39 In our view, the economic arguments for housing at Te Awa Lakes can be summarised as follows:
• The area is currently zoned for industrial (with much of it deferred), but as per our analysis elsewhere Te Awa Lakes is not required for these purposes; overall industrial demand/ supply is not stretched, and our view is that Te Awa Lakes does not offer particular strategic advantages for industrial. • Hamilton is facing a housing shortage and will need to provide for increased supply in the years to come to mitigate this. • Te Awa Lakes can offer a high level of residential amenity. It is adjacent to the Waikato River and residents will be part of an attractive mixed-use community which includes distinctive tourism and adventure activity. The location adjoining the river is advantageous for residential, and adds value to that activity, whereas it would not have the same effects for industrial uses. Te Awa Lakes is also one of two remaining riverside locations in Hamilton which can offer these advantages (the other being the Peacocke growth node – riverfront locations in Flagstaff are now almost all spoken for). • Intensification should be encouraged in Hamilton, but like all cities it will need to provide a balance of ‘growing up and out’. • We understand that Te Awa Lakes is already bulk serviced, and as such it will be relatively straightforward to bring onstream, helping competition in the housing supply market.
Tourism
9.40 Property Economics appear sceptical of the projection of 200,000 Adventure Park users per annum, and indeed this figure is hard to quantify at this very early stage when the exact nature of the Adventure Park is not known (in terms of either activities or prices). However, we believe it is within a realistic range – hence why we have provided various other examples – and we also note that on-site accommodation will help to support user numbers.
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9.41 At any rate, the total number is not important for our economic assessment because we are not concerned with the number of locals visiting the Adventure Park – only with visitors from outside the local area, whether they come from the wider Waikato, elsewhere in New Zealand or overseas.
9.42 We have not quantified the ‘number’ of visitors from outside the local area, but instead made assumptions around their overall expected spending. This is stated in paragraph 7.19 as being “equivalent to 20,000 extra international visitor nights a year, at the national average of $183 per visitor night”.
9.43 In practise, both international and domestic visitors will contribute to the economic effects of the Adventure Park, and both day and overnight visitors. We are simply assuming that the net result of all these visitor groups is “equivalent to” the measure above.
9.44 Our key finding in terms of tourism economic effects is given in paragraph 7.20: “This gives a total assumed spending boost of $3.7 million a year, which we believe to be a very conservative estimate of the tourism impact from the adventure park”. The exact value of these benefits is not possible to predict at this point, and we see the figure above as being conservative with actual benefits likely to be much higher. We believe the effects of the Adventure Park are unambiguously positive.
9.45 Our economic assessment has focussed on the Adventure Park, not on accommodation.
9.46 We take a different approach for looking at accommodation. Te Awa Lakes does have a variety of advantages for accommodation which we outline, as well as it providing synergy with the Adventure Park.
9.47 We also note that there will be overlap between Adventure Park users and accommodation guests, especially given that our focus is on new economic activity which we restrict to people coming from outside Hamilton.
9.48 We note that conservatively “190,000 guest nights multiplied by $183 average spending per night would yield $34.2 million in spending” in the Waikato RTO area. However, we are at pains to point out that “not all of this spending will be ‘new to the region’ as a result of Te Awa Lakes”.
9.49 The $34.2 million is not an economic impact figure and we have not included it in the “summary” of chapter 7.0 or 10.0, the “conclusions” section. The figure is a conservative estimate of how much accommodation guests could spend in the Waikato RTO. To ascertain the actual economic impact, we would need to estimate what proportion of that spending might be new to the region, and then separate that out from any Adventure Park impact.
9.50 We would also need to quantify any economic costs which would reduce the overall benefit. We have identified competition with the CBD as one potential cost. Property Economics “agree that [Te Awa Lakes] accommodation is unlikely to significantly compete with CBD commercial accommodation”, but it is still a potential cost which we recognise but have not attempted to quantify.
9.51 Our overall focus has simply been to consider the evidence and form an opinion as to whether the net effects of Te Awa Lakes accommodation are positive or negative. We conclude that they are positive.
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9.52 We do take issue with Property Economics’ assertion that “none of the points raised in the RCG report provide comfort or support” on the extent to which Te Awa Lakes accommodation will compete with the CBD. This is addressed in paragraph 7.26.
Retail
9.53 Property Economics’ comments on retail suggest that they read our report as estimating a total $5.7 million in visitor retail demand, including both food & beverage and other retail.
9.54 Our report was not sufficiently clear on this and we have reworded paragraph 8.18 as a result.
9.55 Our actual estimates were $5.7 million in visitor food & beverage demand, plus an additional $5.7 million in other retail demand.
9.56 To the extent it is “unclear how the report arrives at” these figures, we have simply made reference to nationwide visitor spending patterns, and made what we believe to be conservative assumptions of the fraction that could be captured (from accommodation guests only), given that these guests are staying onsite and will (we assume) have access to a boutique retail and F&B offering which is well matched to their needs.
9.57 We support Property Economics’ overall conclusion that “this level of retail provision is unlikely to have an impact on existing centres”.
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10.0 Conclusions
The Industrial Market
10.1 Based on the work in this report, we believe that Te Awa Lakes is not required for industrial purposes, as the supply-demand balance is very healthy, both now and projected into the future. The Hamilton and sub-region industrial market is more than adequately provided with land, and given the proactive approach by Future Proof and member councils to make land available for industrial expansion, is in no danger of repeating the mid-2000s situation.
10.2 At present, industrial development is concentrated in several locations with excellent characteristics (highway and rail access, efficiency through scale, etc). This should be encouraged to continue, in places like Te Rapa Gateway, Northgate Business Park and Ruakura. This will have agglomeration and other benefits.
10.3 If Te Awa Lakes were to retain its industrial zoning, uptake would most likely be slow, or otherwise would reduce the speed of uptake in other areas. Overall, the “net” increase in industrial employment and economic activity from Te Awa Lakes being developed for industrial purposes would be negligible.
10.4 The RPS seeks to avoid oversupplying industrial land for sound economic reasons – e.g. dispersing employment, which reduces agglomeration benefits and leads to more vehicle travel. However, even after scaling back the speed and quantum of supply compared to what was originally envisaged in Future Proof, the RPS still makes more industrial land available than is likely to be needed. Oversupply is still a potential issue.
10.5 At present, Te Rapa North has 14 hectares of industrial land zoned which can be developed prior to 2021 (Table 6-2 of the RPS). Te Awa Lakes would remove 2 hectares, with the total long-term removal of land supply equal to 25 hectares.
10.6 Horotiu is a larger industrial node than Te Rapa North, with long-term (to 2061) developable capacity of 150 hectares vs 85 for Te Rapa North. In the short term, it is even more important, with 56 hectares which can be developed prior to 2021. In practise, the two nodes are adjacent and can essentially be considered as part of the same location.
10.7 Our analysis in this report shows that the RPS criteria for this plan change are met, i.e. there is “sufficient” zoned land in the node even without the 25 hectares we will be removing. This is certainly the case, with land available in the node itself and various other areas around the sub- region.
The Adventure Park and Accommodation
10.8 Given the above, it is appropriate to consider other uses for the site, as Perry Group have done. These include site-specific activities which could not be easily located elsewhere.
10.9 For example, the Adventure Park concept is dependent on having a large site, with a mix of topographies and water features. If not developed at Te Awa Lakes, it would be unlikely to locate elsewhere in Hamilton, and would most likely simply not establish. This economic opportunity to provide a gateway destination would therefore be lost to the city.
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10.10 As outlined in paragraph 7.20, we conservatively estimate that the Adventure Park could result in at least $3.7 million a year in extra tourism spending.
10.11 Enabling the Adventure Park as a key anchor for Te Awa Lakes will catalyse other tourism- related activity: visitor accommodation, F&B and related services. These activities all complement each other, and help to ensure the viability of the overall development. This means that an on-site accommodation offering will help to support the main Adventure Park activity.
10.12 As noted in paragraph 6.45, The Stafford Group estimate that only 22% of overnight visitors to Hamilton stay in commercial accommodation. Of course, day visitors do not stay in accommodation of any kind, so a large proportion of visitors to Hamilton do not stay overnight at all.
10.13 Providing accommodation in Te Awa Lakes will not only increase the total number of guest nights in Hamilton, it will lead to other spin-off benefits for Hamilton and the Waikato as visitors will be more likely to stay, or to stay longer.
10.14 Chapter 7.0 provides more detail on the potential costs and benefits of Te Awa Lakes accommodation, including effects on the CBD. Our key conclusion is that the net effects are positive, so we support the proposed accommodation offering.
Retail at Te Awa Lakes
10.15 The various other activities proposed for Te Awa Lakes will support an on-site retail offering. As discussed in chapter 8.0, the proposed rules are for retail in a ‘neighbourhood centre’ environment, capped at 2,500 m2 and with individual shops limited to 150 m2.
10.16 This is in line with the likely demand for convenience retail, F&B and associated uses at Te Awa Lakes. It will not have significant adverse effects on other centres.
Housing at Te Awa Lakes
10.17 Housing has been identified as another significant use for Te Awa Lakes. Hamilton is experiencing high demand for housing, and we expect this to continue. Hamilton’s strong historical growth, proximity to Auckland and relatively diverse economy means it is well positioned to keep attracting new residents.
10.18 Housing supply, by contrast, is under some pressure, as evidenced by recent price rises and marginal (population-based) demand running ahead of (consented) supply. The new Housing Accord sets targets to grow the number of sections and homes consented even further.
10.19 Te Awa Lakes is well situated for residential uses, and can offer high amenity with its position close to the Waikato River and Te Awa River Ride. Households are likely to place a higher amenity value on this location than industrial uses, and there are only a limited number of places in Hamilton which offer such a riverside location.
10.20 Importantly, Te Awa Lakes can be developed quickly, and commence within the Housing Accord timeframes.
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Overall Conclusions
10.21 Having reviewed the relevant parts of the Waikato Regional Policy Statement, Future Proof strategy documents and a wide range of market information, we consider that the Te Awa Lakes plan change will have positive economic effects and that it should be supported.
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