Vacant space in Hamilton's CBD office supply fell 1 per cent in the six months to June, new survey results show.

The survey, a collaborative biannual report produced by CB Richard Ellis and NAI Harcourts, showed that overall inner city office vacancy rates fell from 10.6 per cent in December 2011 to 9.6 per cent in June 2012.

Overall floor space fell by 23,977 square metres. It is the second lowest vacancy rate recorded since 2009.

It is also the second consecutive six-month period there has been an improvement in occupancy following a two-year period of decline.

The results suggest business confidence in future prospects may be improving, the survey says.

However occupancy levels are expected to fall over the second half of this year as relocations outside of the city occur, specifically RD1 which has vacated more than 1500 square metres in the CBD and moved into Te Rapa.

Three of the five quality grades showed improvement over the six-month period, the survey said.

Grade B fell from 9.4 per cent to 1.2 per cent vacancy following AA Insurance leasing 904sqm of space in the BNZ building. Grade D fell from 8.6 per cent to 7 per cent and grade E decreased from 34 per cent to 28.4 per cent.

Grade C saw the largest increase from 3.4 per cent to 5.5 per cent due to large tenancies like Te Puni Kokiri (the Ministry of Maori Development) relocating into smaller city spaces.

NAI Harcourts managing director Mike Neale said that while Grade A space remained in demand, vacancy had increased from 2.5 per cent to 4.2 per cent because of new space becoming available in the six-month period.

"But there still is consistent demand for A and B quality space . . . especially for smaller spaces of those grades," Neale said.

Grade A and B office space combined made up only 15 per cent of overall office space capacity in the market, but that was expected to increase with the current Citygate and Project Grantham construction under way and the proposed Victoria on the River project, he said.

Professional, scientific and technical services still remain the largest business sector occupying office space in the city but market share for the sector has fallen from 25 per cent to 19 per cent.

Public administration and safety make up 17 per cent of the local market while financial and insurance services had a 2 per cent boost in the last six months to make up 13 per cent of the market.

The three sectors occupy 49 per cent of the overall central city office space.

kashka.tunstall@waikatotimes.co.nz

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