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WELLINGTON RETAIL 2011

RETAIL MARKET 'STEADY AS SHE GOES'

As retail vacancy in the Wellington Region slowly trends down, it seems apparent that the decline in the retail sector has ceased and that a gradual but steady recovery is underway. A pick up in activity has been observed in the leasing market as tenants continue to reposition themselves as economic recovery becomes more sustained.

Although a general recovery can be observed there are restrictions to more robust growth, the most prominent of which is funding. This is an issue at all levels of the retail chain. Investors, while interested in retail property are looking for exceptional deals because of a lack of funding for investment and the risks associated with recent elevations in vacancy. Tenants, while determined to set themselves up within high pedestrian count areas, are working on the sharpest deal they can to accommodate the increased occupancy costs within their business plan. And finally, consumers are in sales mode as they work to balance debt repayment with increasing prices for non-discretionary items.

The continued northern migration of the office sector in Wellington’s CBD has been the precursor to a similar trend with the retail sector. Retail tenants will follow office tenants in order to benefit from the nine-to-five population. This is what ensured the golden mile became the pre-eminent retail destination in Wellington.

While seismic activity has become a growing concern, and a key decision driver, for other property sectors in Wellington, location remains the key driver of leasing decisions in Wellington. Andrew Monahan from Prime Property Group, confirms that retail tenants are primarily concerned with location. It is location that is helping to maintain rental levels in a market of excess vacancy.