Hands on the commercial real estate timepiece are slowly moving away from the bottom marker and the sector is getting a boost from a number of quarters.

With spring around the corner, we’re currently sitting just past six o’clock on the property clock, which is deemed early recovery territory, but at least we’re heading up the left-hand side of the face now.

With another OCR drop of 25 basis points fully priced into the market, there are direct and indirect signs that commercial real estate as an asset class is at a positive tipping point.

Investors shifting from residential to commercial

There’s evidence that intergenerational wealth is selling out of residential investment portfolios and actively looking at commercial given the more favourable lease structures and real returns, and institutional offshore capital is also hovering for opportunities.

Auction activity rebounding nationwide

Around the country, Bayleys’ auction volumes are starting to rebound, and sale deal numbers are up year on year which is encouraging with retail property attracting solid enquiry and transacting well across regional, sub-regional and large-format assets. There’s still some lingering softness in the Auckland market with values trying to find their level, but Canterbury and Queenstown are proving to be hotspots of economic growth and this is giving significant confidence to the market.

Term deposits maturing into low returns

There’s more than $200 billion sitting in term deposits with huge volumes nearing maturity and rolling off onto two to three-percent rates after lofty highs in the seven to nine-percent range. Term deposits are not considered a long-term investing strategy, and we expect to see commercial and industrial property assets under the spotlight as investors seek better returns.

Strong rural and managed fund capital

Rural balance sheets are also strong, and there’s billions flowing though KiwiSaver and other fund managers so there’s certainly money circling for commercial property assets.

Listed property trusts delivering results

The listed market is performing well, with Goodman Property Trust reporting an increase in net property income driven by new development completions, portfolio occupancy close to 100 percent, positive leasing results and rental growth via updated terms.

Surge in investor visa applications

Since announcing changes to policy settings in April this year, Immigration New Zealand has received more than 200 Active Investor Plus applications across the new growth and balanced categories representing around NZD $1.43 billion of capital potentially coming into the market. That’s a groundswell of active capital potentially eyeing up property assets.

Budget 2025’s Investment Boost for business

Budget 2025 held a wild card for businesses and commercial and industrial building owners with the Investment Boost announcement opening the door to tax benefits linked to new plant and machinery investments, the purchase of new commercial property assets, and capital improvements and seismic upgrade works. This should provide stimulus to the market and contribute to economic growth around the country.

Earthquake-prone building review underway

Also topical is Building and Construction Minister Chris Penk’s government review into risk and remediation management of earthquake-prone buildings. The current system is multi-layered with a lack of clarity around viable NBS thresholds, does not consider variable regional seismic risk profiles, and is cost-prohibitive.

Balancing the regulatory environment with risk to human life is the issue here and the commercial real estate sector awaits new recommendations following the government review process.

Market still facing headwinds in 2025

While there are some real bright spots on the horizon, 2025 has been somewhat of a grind for commercial real estate characterised by slower decision-making, some residual disconnect between vendors and buyers over deemed value, and just general caution around economic conditions.

Watching for the next market upswing

It’s only a matter of time before the real estate cycle clicks into a new gear, so get in touch – we’re watching the market carefully and have the intel to get you across the line.