The commercial real estate market is picking up again, with a more stable investment environment as inflation moderates and interest rates drop.
“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,” JLL’s New Zealand Capital Markets Report 2025 said.
“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.”
JLL NZ managing director Todd Lauchlan said New Zealand looked like a good place to invest given more accommodative government policies, falling interest rates and yield returns.
“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.”
Commercial property transaction levels were below the last cyclical peak of $7.08 billion seen in 2021.
However, Lauchlan said the 2025 and 2024 recovery demonstrated a healthy base for continued value and volume growth and a more sustainable market dynamic.”
Auckland industrial’s vacancy rate at 2.8 percent was tighter than Sydney’s 4.4 percent, Melbourne’s 5.3 percent and Brisbane’s 4.7 percent.
He said Auckland in particular offered prime industrial investment opportunities at superior yields to Australia, with industrial average yields at 5.25 percent, compared with Sydney (5.44 percent) and Melbourne (5.81 percent).
Prime office properties were also highly sought after, while the secondary market, comprised of older grade buildings, offered medium-term rental price recovery.
“There’s a phrase called replacement cost. 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,” Lauchlan said.
“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,” he said, adding the city’s geography, proximity to the harbour and shortage of available land, along with infrastructure improvements like the CRL and bus lanes were attractive to investors.
“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.”
New Zealand’s retail sector was also expected to see some improvement, as economic conditions improved.
The report said the broader New Zealand retail landscape, particularly shopping centres and large format retail, also demonstrated underlying resilience.
The report said the New Zealand market offered seasoned investors a strategic alternative to Australia’s commercial market, which typically attracts the same investors.
“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.”
Lauchlan said the outlook for 2026 was increasingly positive.
“2026 I think, will be the best year in the last three or four, I’ve got no doubt about that.”
