The market has already decided
When 53% of all commercial property investment activity flows into a single sector, it is no longer a preference. It is a structural reallocation. Industrial property now dominates New Zealand’s commercial real estate market by volume, value, and long-run returns, according to JLL’s Capital Markets Report for 2024.
Bayleys Research confirms that industrial has headed the league table for 15-year long-run income return averages and capital growth across all commercial asset classes. This is not a pandemic artefact or an e-commerce sugar hit. It is a decade-and-a-half trend that has survived multiple cycles, and the market is pricing it accordingly.
Total commercial property transactions of $5 million or more reached $4.12 billion in 2024, up 5.4% year-on-year. Auckland industrial alone recorded $352.99 million in sales transactions in the second half of 2025, remaining the most active sector by both volume and value.
Offices emptied, warehouses filled
The industrial story is sharpest when you hold it against the office market. Hybrid working has been adopted by 94% of organisations surveyed, with non-CBD office vacancy sitting at 16%. Industrial vacancy, even after rising from 2.8% to 3.7% in Q4 2025, remains tighter than Sydney at 4.4%, Melbourne at 5.3%, and Brisbane at 4.7%.
At their tightest, industrial vacancy rates remained below 1% compared to offices at 16%. The divergence is structural, not cyclical. Capital has noticed.
E-commerce rewired the demand base
Logistics and retail-related occupiers held 34% of Auckland’s prime industrial market in 2019. By 2025, that share had risen to 41%, per CBRE’s New Zealand Real Estate Market Outlook. Between those years, Auckland’s prime industrial occupier market expanded by 1.6 million square metres, with logistics and retail accounting for more than half of that growth.
CBRE’s head of industrial and logistics Claus Brewer says “occupiers remain active but highly disciplined, with supply chain reliability, proximity to population centres, and operational efficiency front of mind.”
Meanwhile, New Zealand’s primary sector is adding fuel. MPI forecasts food and fibre export revenue at $62 billion for the year to 30 June 2026, approximately 16% higher than two years earlier. Cold storage investment is accelerating off the back of dairy and meat export growth.
Land scarcity is the moat
Industrial land values increased 22% in the past 12 months. In Auckland, industrial-zoned land is almost entirely spoken for, with even Drury’s titled land snapped up.
JLL NZ managing director Todd Lauchlan identifies the structural protection: “What it costs to build a brand new building of equivalent in an equivalent location is often significantly higher than what people pay for an existing asset. So that gives investors comfort that they won’t be competing with a whole lot of new projects nearby.”
Calder Stewart has delivered more than $1.5 billion of property projects in the past three years, including more than 750,000 square metres of industrial buildings. Its forward development programme could potentially double over the next three to five years, backed by about 900 hectares of industrial-zoned land across the country.
What occupiers and investors should know
Prime industrial assets are transacting at yields averaging between 3.70% and 4.15%. CBRE forecasts average annual total returns of 9.4% over 2023-2027, reaching double digits in 2026-2027.
For tenants, the picture is less comfortable. Much of the new supply coming to market is pre-committed through build-to-spec arrangements, meaning available space remains tight. When prime industrial rent growth resumes, it will be comparatively high.
Lauchlan frames the timing directly: “We’re definitely at the sort of bottom of the cycle, or close to, and we’re starting to recover.” With the OCR at 2.5% improving borrowing conditions and international investors putting $673.4 million into NZ commercial property in 2024, the weight of capital behind industrial is only growing.
Fifteen years of outperformance is not luck. It is the market correctly pricing utility over prestige, and the gap between warehouses that do something and offices that sit half-empty shows no sign of closing.
Sources
- JLL: Perspectives on Navigating NZ’s Capital Markets (2025)
- Bayleys: Latest research shows industrial property market hasn’t missed a beat (2025)
- JLL NZ: Auckland Industrial Market Dynamics Q4 2025 (2025)
- NZ Herald/CBRE: Commercial, industrial property – where to for rents, occupancy, returns? (2025)
- RNZ: Commercial real estate market gaining momentum in more stable investment environment (2025)
- OneRoof/CBRE: Omnichannel commerce underpins industrial demand (2025)
- E-commerce News: Primary export growth lifts demand for industrial property (2025)
- RNZ: New Zealand still ranks amongst best in commercial property investment despite economic downturn (2025)