Wellington Retail
Market Snapshot
Q4 2019

Occupier demand has remained strong against a backdrop of relatively fixed supply.

February 24, 2020

We recorded a significant fall in vacancy levels across all sectors in our 2H19 vacancy survey, indicating that occupier demand has remained strong against a backdrop of relatively fixed supply. CBD vacancy fell to 4.1% from the 6.5% recorded in 1H19. Southern CBD vacancy showed a similar trend with a fall from 12.9% in 1H19 to 9.3% this half, driving overall vacancy levels down to 5.2%. 2H19 also saw a notable increase in net absorption, particularly when compared with the recorded 172 sqm of net absorption in 2H18.


The overall retail stock base has remained relatively fixed into 4Q19, though levels of stock under construction have diminished as projects complete and exit the development pipeline. As with the office and industrial markets, high construction costs continue to limit potential new development, despite issues around low NBS rated buildings. However, with a fair amount of stock still in the pipeline at various stages, retail space is unlikely to stagnate completely for the foreseeable future. In particular, 8-14 Willis Street and 40-44 Bowen Street are set to provide some new, quality retail space over the next few years.

Asset Performance

With accommodation options tight, rental levels have remained stable into 4Q19. The one exception to this is a very small reduction noted in the upper prime rental band on Willis Street, lowering the overall average rent psm to $1,387.50 psm from $1400 psm in 3Q19, though Lambton Quay prime rents and secondary rents remained at $2,425 psm and $775 psm respectively.

Average yields remain unchanged for the sixth quarter in a row, with the downside risks associated with the challenges faced by the retail sector counterbalanced by lowering interest rates and generally compressed commercial yields. Primary asset yields have remained at 7.13% and secondary assets at 9.75% this quarter. 

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