Older properties being transformed

A trend of converting industrial sites into retail spaces is expected to continue, as demand increases in the Wellington region.

New research from CBRE shows a rise in the number of industrial sites being transformed for large retailers, ‘‘particularly evident’’ in Petone, and expected to become more common in Porirua and Lower Hutt.

Demand by retailers, coupled with hunger for more industrial developments, has contributed to rising land prices in the sector.

Land values increased to $365 per square metre over the past six months, with the largest increases in Plimmerton and Porirua.

Meanwhile, demand for office space was continuing to outstrip supply, with developers considering new buildings.

CBRE senior analyst Richard Carr said all indications pointed to more development in Wellington, however it could be ‘‘more of a medium-term outcome’’.

‘‘While rental growth is forecast, rates are still below the economic feasibility required of new developments.’’

This means investment would more likely be put into small scale refurbishment, rather than a complete overhaul, Carr said.

‘‘There will come a tipping point in the medium term where rental rates get to a point where we can expect large-scale capital work programmes to cater for prime demand.’’

Research also shows demand for prime space in the retail sector is strong, with international retailers indicating their desire to enter the Wellington market.

An example of this was Mecca leasing the ground floor of Topshop’s old site on Lambton Quay.

Despite this, CBRE Wellington managing director Matthew St Amand said there were still not enough large vacant spaces.

There were smaller spaces available, however, they were not big enough for major international brands, he said.

Retailers were drawn to the right spot, with the right amount of floor space, St Amand said.

‘‘If retailers are confident of a location, they will pay a significant premium, as it will drive in store revenue.’’

Retail vacancy rates are currently sitting at 6 per cent, an increase on last year mainly due to Topshop’s exit.

‘‘Land values increased to $365 per square metre over the past six months, with the largest increases in Plimmerton and Porirua.’’

The trend of industrial sites being transformed for large retailers is ‘‘particularly evident’’ in Petone, and expected to become more common in Porirua and Lower Hutt.