Wellington’s retail and hospitality businesses are grappling with a significant drop in foot traffic, and they’re pointing the finger at the rise in remote work as a major factor. The capital’s commercial hubs, once bustling with office workers and government employees, have seen fewer in-person customers since the pandemic accelerated the trend of working from home.
According to the Te Kawa Mataaho Public Service Commission, nearly 40% of Wellington’s population works in government or public service, and a substantial portion of these workers are now either fully remote or in hybrid arrangements.
The shift to remote work has led to a noticeable reduction in daily foot traffic, particularly in areas previously dependent on office workers for lunch-hour spending and after-work socializing. Café and shop owners, especially in the CBD, have reported that fewer people are venturing out during the week, which is causing concerns about sustainability for smaller businesses.
However, some industry observers such as Zoltan Moricz, the Head of Research at CBRE and analysts at Colliers argue that the real culprit isn’t remote work but rather inflated commercial rent prices.
Traditionally, commercial properties in prime locations command high rents due to the expectation of strong foot traffic, but with the drop in in-person office attendance, these businesses are now facing a double bind of lower revenues and high overheads. Many business owners feel squeezed by commercial landlords who have not adjusted rents to reflect the new realities of reduced foot traffic.
Despite business complaints, the remote work model has shown little to no impact on overall productivity. Studies indicate that full work-from-home (WFH) arrangements do result in a slight drop in productivity, but it’s not enough to make a substantial difference.
Hybrid models, on the other hand, where employees split their time between home and the office, show no measurable loss in productivity and may even enhance workplace culture by improving employee satisfaction.
In a survey conducted by the CBRE New Zealand Office Occupier, 91% of Kiwis have embraced the hybrid work model, balancing the flexibility of working from home with the benefits of office collaboration. This may explain why the push to return to fully in-office work is met with resistance, not only from employees but also from organisations who see the benefits of these flexible working conditions.
Adding to the challenges for Wellington’s businesses is the current economic situation driven by the Reserve Bank of New Zealand (RBNZ). The central bank has deliberately engineered a slowdown, hiking interest rates to curb inflation.
While this is designed to rein in excessive spending, it has disproportionately hurt small businesses that rely on discretionary spending. Consumers are tightening their belts, further reducing their expenditure on dining out, retail shopping, and other non-essential services, which is precisely what the RBNZ intends to achieve.
The broader public may benefit from such measures in terms of price stability and reduced inflationary pressures, but local business owners, especially in Wellington’s retail and hospitality sectors, are feeling the strain.
What’s happening in Wellington is a microcosm of a wider trend that could affect New Zealand as a whole. With more businesses adopting hybrid or fully remote models, the demand for commercial space in other urban centres may also shrink. This raises questions about the future of high-value commercial properties and whether landlords will need to adjust rents to stay competitive.
For Kiwi business owners, the implications are clear. Those in retail and hospitality will need to adapt to a market where fewer customers are available during traditional work hours. Businesses may need to rethink their offerings, focusing on peak times when people are out and about, such as evenings and weekends. They may also need to explore alternative revenue streams, such as delivery services or online sales, to compensate for the loss of foot traffic.
Ultimately, the changes in how people work, spend, and live in urban centres will require Kiwi business owners to be more agile than ever. Adjusting to this new reality will not only determine the survival of individual businesses but also shape the economic landscape of New Zealand for years to come.
