Wellington retail property market snapshot Q1 2021
In 1H21 we expect Wellington retail property vacancy to continue increasing as more businesses adapt their trading practices to alleviate economic pressures.
Retail vacancy in Wellington increased in 2H20 for both the CBD and Southern precincts resulting in a total market increase of 234 bps to 7.63%. At a more granular level, the CBD saw an increase from 5.1% to 7.1% (an additional 1,600 sqm). The Southern CBD vacancy increased from 5.9% to 9.4% (but added only 835 sqm of additional vacancy). In 1H21, we anticipate Wellington retail vacancy to continue increasing as more businesses adapt their trading practices to alleviate economic pressures. An example was Office Max, who closed their Wellington Central store during 2H20.
For the second half in a row, the Wellington retail sector saw greater withdrawals than completions. In 2H20 total stock decreased by 1,435 sqm; impacted by several withdrawals for refurbishment in the CBD precinct including 1,700 sqm at 1 Willis Street. This trend is not unexpected. Low NBS rated stock continues to be removed and refurbished but not all space is earmarked to return to retail use (e.g. the Farmers Building, converted to an office for Wellington City Council). Some retail projects are coming out of planning though, increasing stock under construction to 6,670 sqm.
Continuing Q-o-Q trends, both primary and secondary gross face rents have decreased in Wellington as a whole and across all sub-precincts. Primary rents fell 1.4% to $2,150 psm, while secondary rents experienced a greater fall of 5.2% to $613 psm. A slower decline of prime rental levels demonstrates greater demand for quality spaces. There was little movement in Wellington retail yields in 4Q20, with only the upper yield for Prime CBD observing any change. Meanwhile, Prime capital values fell for the fifth quarter in a row; a 2% drop to $19,948 psm.