Wellington Retail Market Snapshot Q3 2019
With the introduction of additional international retailers into the Auckland market during 3Q19, demand may see an uptick in 2020 and beyond.
With the introduction of additional international retailers into the Auckland market during 3Q19, demand may see an uptick in 2020 and beyond. If successful in entering NZ’s largest market, it is feasible that Wellington will be the next port of call for many of these retailers. One prominent international retailer to begin trading recently is Taco Bell, which is already planning large scale expansion. However, this flow-on demand is likely to remain in the top end of the grade spectrum, with demand for secondary space remaining muted.
New supply continues to steadily trickle into the market as mixed-use developments in the pipeline complete, though the overall retail stock base has remained relatively fixed. However, around 5,000 sqm of new stock is set to enter the market by mid-2020, boosting existing space levels through refurbishment and new build activity. Notable developments due to complete next year include 16-20 Willis Street, and the Old Farmers Building at 94-106 Cuba Street.
Strong F&B demand coupled with limited new supply and low vacancy have kept rents stable throughout key retail districts for now. Ground frontage space on Lambton Quay and Willis Street held at $2,425 psm and $1,400 psm respectively. Secondary CBD rates also held firm at $775 psm. With higher quality space trickling in, we expect top prime rental rates to see a slight pickup. However, outside this upper tier rates are expected to soften.
Yields have remained largely unchanged over the quarter, with the average prime and secondary yields sitting at 7.13% and 9.75% respectively. Yields are expected to experience softening, following suit behind Auckland and other cities around the Asia Pacific region.