It is a difficult question 4runner that every theologian eventually must struggle with. I chose it for that reason.
For starters, I might state the characteristics of God that necessitate hell are
His justice, His love, and His sovereignty.
He gives us life and He doesn't take that gift back and the choices we make in life and what we do with our lives matter.
It is a true that not all evil is punished in this life. Many have observered the wicked prospering (if only for this lifetime). Thus, the existence of an after-this-life place of punishment for the wicked is necessary to maintain God's justice. And God's sovereignty is such that that there will be a final victory over evil.
For those who reject God and His goodness, using their life for evil, knowingly or in a deceived state, the punishment of an eternal creature for free-will sin against a perfect eternal God (who doesn't take back the good gifts such as the gift of life) is eternal punishment. And God created humans to have free-will and will not force them into heaven against their will (human dignity demands the ability to reject heaven).
And I might argue that nonexistence cannot be said to be a better condition than existence, since nonexistence is nothing; to affirm that nothing can be better than something is a colossal category mistake. In order for two things to be comparable, they must have something in common, and there is absolutely nothing in common between being and nonbeing for they are diametrical opposites.
It is precisely because we are not animals that God does not treat us like them. Annihilating those who do not carry out His will would be unkind and unmerciful, as would be a father who shot his child because the person grew up and rejected him, became deceived, and turned to evil corrupting his soul. It is more merciful to allow them to choose their own way after striving with them all the days of their life.
I could argue that both of the Testaments reveal a God of love who is also a God of justice. God offers men and women his love and forgiveness, urging us to repent and escape the terrible and eternal judgments of the end of history. God wants everyone to be saved; hell was created not for people, but for the devil and his fallen angels.
Hell is only for the unreformable and unrepentant, the reprobate. Hell is not for anyone who is reformable, for God in His wisdom and goodness does not allow anyone to go to hell whom He knew would go to heaven if He gave more opportunity. This idea is rejected by many fundamentalists though who assert that God cannot save someone who earnestly seeks Him but never heard the name of Christ so I'll save that for a different thread. But maybe I've opened up a can of theological "worms" so to speak. I hope not. Peace.
How would you have answered it?