Wellington Retail Market Snapshot Q1 2019
Wellington’s Retail market has continued to face structural changes as consumers alter the way they shop, with a number of trends impacting brick and mortar retailers across NZ.
Similarly to the office and industrial markets, we have seen a preference for higher grade stock. This has then created a divergence between prime and secondary assets with regards to demand, rental pricing, vacancy and investment preference. Additionally, we expect the increased demand for food and beverage will continue while traditional retailers are unable to adapt.
We expect supply to increase some 5,000 sqm in late 2019 and into early 2020. This includes the development of 16-20 Willis Street, Stewart Dawson’s corner and the old Farmer’s store in the Southern CBD, which will cater to a range of occupiers.
Ongoing refurbishment and demolition of damaged and low NBS rated buildings will continue to ensure stock trickles into the market, typically returning at a higher grade than at the time of withdrawal.
Rents in both prime and secondary retail assets have stayed flat from June 2018, keeping their $2,425 and $775 psm values respectively. Although, we predict that occupiers are looking to move toward better deals in upcoming accommodation reviews.
Primary yields have remained at 1H18 levels, with the average sitting at 7.13%, while secondary yields have stayed at 9.75%, unchanged since December 2011. Investors are becoming more cautious when it comes to retail assets, particularly those which will need costly improvements to increase NBS ratings or those outside of growth nodes and regional centres.