Wellington CBD retail vacancy rates have declined year on year, but extended lockdowns and movement restrictions are expected to have the opposite effect in Auckland’s CBD.
In half-yearly retail property reports for each city, Chris Dibble, national director of partnerships, research and communications at Colliers, warns leasing conditions in both cities will remain challenging.
The Wellington CBD retail vacancy rate reduced from 7 per cent in June last year to 6.2 per cent last June and average gross prime retail rents remained steady over the opening half of this year
“While there has been some buoyant leasing activity for prime quality and well-located shops, overall leasing conditions remain challenging, especially for secondary premises,” said Dibble.
“Overall strip retail vacancy rates are expected to remain elevated over the next 12-18 months, especially in the hospitality and entertainment sectors, due to restricted trading activity from Covid-19 Alert Level requirements.”
Despite more consents being issued for retail space in Wellington’s CBD, the total supply of retail space is not expected to rise significantly during the next year. “Pockets of new retail space will become available in the CBD due to new office tower developments, however, the focus on alternative shopping and retailing locations around the region is where growth will predominantly occur. The completion of retail refurbishment programs will also boost supply and new leasing options.”
Impact mixed in Auckland
In Auckland, meanwhile, the return of higher alert level restrictions in the second half of this year has disrupted retail sector trading results. However, not all retail sectors are experiencing the same impacts, with essential services remaining resilient and many businesses structurally more sound, having developed an increased online presence and/or click ‘n collect services.
“However, store closures and rising vacancies are projected, with the hospitality and entertainment sectors at the forefront. This will likely see overall strip retail vacancy elevated across Auckland for the short-term, which does provide some opportunities for retailers with a longer-term timeframe.”
Dibble says higher vacancy rates will remain in the CBD until the lack of foot traffic there is resolved. Suburban markets may benefit from remote working when Alert Levels allow. Bulk retail premises remain resilient showcased by a vacancy rate of less than 1 per cent.
Average Prime CBD rentals lifted in the June quarter, due to new leases for properties within the luxury goods precinct. However, these are now forecast to run flat over the year ahead.