As New Zealand enters a new economic cycle, commercial property is emerging as a focal point for investors, setting the stage for what could be a landmark year in the country’s real estate market.
Commercial property has quietly become the investment of choice for many, especially as residential returns flatten. According to Rethink Group CEO Scott O’Neill, “More investors are moving towards long-term, stable returns in commercial property,” citing benefits such as favourable lease agreements and stronger yield potential across sectors. These dynamics have sparked growing interest from “Mum and Dad” investors, many of whom are seeking alternatives after underwhelming results in the residential space.
“There’s been price corrections of up to 25- to 30 percent in some areas,” said O’Neill, “and that’s creating the value we see now.”
Surge of Interest from Everyday Investors
The influx of everyday investors into the commercial sector is partially driven by the relative underperformance of residential property. Real Estate Institute data showed only a modest 1.7 percent rise in median house prices recently—still down compared to the previous year. In contrast, commercial property is delivering more reliable, yield-driven returns.
Commercial assets in regional hubs like Tauranga, Hamilton, and Dunedin are drawing attention for offering “high yields at low entry costs,” O’Neill noted. Add to that the tax advantages and increasingly favourable lending conditions, and the attraction becomes clear.
Signs of a Global Outlier
Auckland, in particular, continues to demonstrate resilience. With population growth, urban infrastructure development, and a push for flexible leasing arrangements, demand for space across sectors remains high. Industrial and logistics properties are among the strongest performers, thanks to the ongoing e-commerce boom and a reshaped global supply chain.
According to Isaac Tankard’s 2025 investor insights, suburban office spaces are also gaining traction. As hybrid work models settle, businesses are seeking smaller, more flexible locations in well-connected areas—a trend that benefits localised commercial hubs.
Economic Tailwinds Gathering Pace
After years of subdued activity, optimism is building. PMG Funds CEO Scott McKenzie says, “The commercial property sector is looking primed for recovery as the economic environment begins to stabilise” Lower interest rates, easing inflation, and rebounding consumer and business confidence are setting the stage for a more active second half of 2025.
Term deposit rates are trending downwards, prompting investors to reallocate funds into yield-focused alternatives. “We are also seeing investor activity…slowly picking up,” McKenzie said, highlighting renewed interest in growth-oriented assets.
Government Steps in with Pro-Growth Agenda
Policy changes are also playing a significant role. The government’s new fast-track consenting legislation is expected to ease longstanding barriers for developers. The creation of the Invest NZ agency signals an intent to court foreign capital, further boosting confidence in the market.
Bayleys national director Ryan Johnson noted that “a smoother pathway to gaining approvals under the Resource Management Act… points to a new development cycle in 2025,” especially with political backing for competition and investment-led growth.
Progress on earthquake-prone building regulations may also unlock stalled activity, with proposed legislation aimed at creating a clearer and more proportionate framework for seismic remediation.
Where the Money Is Headed
Industrial and logistics remain top picks, bolstered by demand for warehousing and distribution spaces. Mixed-use developments are also drawing attention, as investors capitalise on zoning flexibility and lifestyle trends.
Value-add investments are proving attractive, with opportunities to renovate or reposition existing assets for modern use. PMG Funds recently acquired a four-storey, seismically strong office building in Wellington and an industrial site in South Auckland—moves that reflect a strategic focus on repositioning and future value creation.
A Market Still Navigating Headwinds
While the outlook is improving, challenges remain. Financing constraints persist, with conservative lending policies still in place. Supply of prime commercial stock remains tight, and sustainability demands are growing. Many tenants are now prioritising energy-efficient buildings, forcing landlords to consider the cost of green upgrades.
Retail and hospitality sectors remain uneven, with profitability still touch-and-go for some operators. However, Bayleys’ national retail director Chris Beasleigh believes momentum will return by late 2025, helped by improving job security and consumer confidence.
Strategies for a Changing Market
For smaller investors, partnerships and property syndicates offer accessible ways to gain exposure to commercial assets. Diversification—across regions and asset types—remains a key strategy.
Experts also emphasise the long-term importance of ESG and technology. High-quality, sustainable buildings are increasingly seen as essential, both to attract tenants and to future-proof investments against regulatory change.