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Wellington Retail Report | First Half 2022

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  • Wellington’s CBD retail sector remained resilient over 2021 with the overall vacancy rate falling to 4.9% in December from 7.8% a year earlier. While the figure has been influenced by the removal of stock for seismic strengthening, leasing activity has remained solid. Confidence in prospects for the sector will be bolstered by confirmation that most border restrictions are to be removed in May, facilitating the return of tourism. The completion over the next 18 months of key civic development and refurbishment projects should also attract increased footfall. Headwinds however persist with increasing interest rates and inflation impacting consumer confidence.

  • Seismic strengthening and refurbishment projects continue to impact overall supply. The CBD inventory increased by 1,367 sqm over the six months from June to December. Development activity within the CBD is likely to remain muted given current demand and supply fundamentals. A majority of regional additions to supply will be developed to meet increasing demand within suburban areas experiencing population growth.

  • CBD rental rates remain under pressure with landlords moving to support leasing activity. Average gross prime rents currently stand at $1,265 per sqm. Rental rates within the bulk retail sector held steady over the six months to December but low vacancy rates point to a resumption of rental growth over the remainder of 2022.

  • Investment activity within the retail sector has remained skewed towards defensive assets such as supermarkets and bulk retail premises. The heightened competition for large format assets led to a tightening of yields with the average rate moving to 7.5% over the second half of 2021. Average yields for prime grade CBD property held steady at 6.5%. While investors have generally taken a cautious approach, there is evidence of increased interest in well managed regional centres benefiting from a strong tenant mix and those located in high growth areas.  

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Wellington Retail Report | First Half 2022

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