Market stabilises as yields, demand lift commercial recovery
The New Zealand commercial real estate market is showing renewed strength, as moderating inflation and lower interest rates create a more stable environment for investors, RNZ reported.
“The first half of 2025 has seen sales momentum build further in the New Zealand commercial and industrial property market after experiencing a welcome upturn in 2024 that points to 2023 as the latest cyclical low,” said JLL’s New Zealand Capital Markets Report 2025.
“The outlook for New Zealand’s commercial and industrial property market remains constructive as we progress through 2025 and into 2026, supported by converging positive fundamentals that position the market for sustained growth.”
Investor confidence rises as cycle turns upward
JLL New Zealand managing director Todd Lauchlan (pictured) said investors were increasingly viewing New Zealand as a safe and attractive destination for capital.
“It's a comparison (investors) make in terms of what the return would be,” Lauchlan said. “And they also look at things like sovereign risk, government policy, overall economic performance.
“And I think typically with property moving in cycles, people like to invest at the beginning of a new cycle, and we're definitely at the sort of bottom of the cycle, or close to and we're starting to recover. So you see a lot of capital looking for opportunities too.”
Although total transaction volumes remain below the last cyclical peak of $7.08 billion in 2021, Lauchlan said the 2024–2025 rebound demonstrated “a healthy base for continued value and volume growth and a more sustainable market dynamic.”
Auckland leads with tight industrial vacancies and solid yields
Auckland’s industrial vacancy rate of 2.8% remains tighter than Sydney’s 4.4%, Melbourne’s 5.3%, and Brisbane’s 4.7%, according to JLL.
Lauchlan said Auckland continues to present prime opportunities for investors.
“New Zealand looked like a good place to invest given more accommodative government policies, falling interest rates, and yield returns,” he said.
He noted that industrial yields in Auckland average 5.25%, outperforming Sydney (5.44%) and Melbourne (5.81%).
Prime office assets also remain in high demand, while secondary-grade buildings offer potential for medium-term rental recovery as quality stock tightens.
Replacement costs and location drive investor interest
Lauchlan said Auckland’s appeal is also driven by geography and redevelopment economics.
“There's a phrase called replacement cost,” he said. “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, and that's particularly the case in Auckland.”
Lauchlan added that the city’s limited land availability, harbour access, and infrastructure projects such as the City Rail Link (CRL) and new bus corridors enhance long-term value.
“Those sorts of things do help people feel confidence that if they invest today, the value of the property will be going up over time, and they'll be able to continue to find good tenants,” he said.
Retail recovery and comparative market appeal
JLL said New Zealand’s retail property sector is also poised for gradual recovery as economic conditions improve.
The report noted that “the broader New Zealand retail landscape, particularly shopping centres and large format retail, also demonstrated underlying resilience.”
It added that New Zealand offers “seasoned investors a strategic alternative to Australia’s commercial market,” highlighting the country’s structural undersupply and stable pricing environment.
“New Zealand's structural undersupply, particularly evident in the industrial sector, coupled with yields that avoided the recent expansion seen across Australian markets, has fostered a more stable pricing environment,” the report said.
OCR cut supports broader economic recovery
“Consumers have been waiting for this, and every rate cut improves affordability for mortgage holders, which is a positive step,” said FAMNZ managing director Peter White.
Finsure NZ country manager Jenny Campbell said the cut was essential to help lift confidence and growth.
“As lenders react to the drop, advisers need to capitalise on this opportunity to get their clients on a better deal, particularly with Christmas just around the corner,” Campbell said.
Outlook: 2026 shaping up as a standout year
Lauchlan said market fundamentals point to a strong year ahead.
“2026 I think, will be the best year in the last three or four, I've got no doubt about that,” he said.
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