New Zealand’s commercial property market is entering a new phase of optimism with investor sentiment growing while the building blocks are in place for growth, according to Colliers.
Colliers’ latest Investor Confidence Survey, which gauges expectations of market fundamentals over the next 12 months, revealed that national confidence rose from 5.1 per cent to a net positive value of 12.6 per cent. This is broadly in line with its historical average.
After several years of volatility driven by rising costs and economic uncertainty, the outlook is shifting.
Falling interest rates, easing inflation, and stabilising construction costs have created conditions that support both developers and investors.
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Finance is becoming more accessible, and consenting activity is beginning to rebound, all of which are supporting rising confidence in the sector.
Hamish Fitchett, National Director of Research & Economics at Colliers, says the fundamentals underpinning the market are stronger than they’ve been in years.
“We’re seeing the pieces align for a period of measured growth. Lower interest rates are boosting lending for commercial property development, and inflation’s retreat is restoring business confidence,” Fitchett says.
“These factors, combined with forecast improvements in labour market conditions, point to a more stable environment for investment.”
The repricing of term deposits in the wake of aggressive interest rate cuts is reshaping the investment landscape.
With new deposit rates trending lower, many investors are reassessing their options and commercial property is emerging as a compelling alternative.
Recent cuts to the Official Cash Rate (OCR) from the Reserve Bank of New Zealand have moved the OCR to 2.5 per cent, well below the neutral rate of 3 per cent, suggesting the economy is now in a stimulatory environment.
Fitchett says the shift in monetary policy is absorbing spare capacity and creating a unique window of opportunity that should be characterised by sustained growth rather than the economic sugar rush that we saw a few years ago.
“This period of interest rate easing from the Reserve Bank is the most significant since the Global Financial Crisis. While that’s good news for borrowers, it means savers are facing sharply reduced returns on term deposits.
"Commercial property, by contrast, continues to offer yields that outperform these lower rates, alongside the potential for capital gains as confidence returns.
“Bank lending for commercial property development has already grown by 14 per cent over the year to September, supported by cheaper financing and improved market fundamentals.
"At the same time, construction costs have moderated, and consenting activity is trending upward, signs that developers are re-engaging and the pipeline is strengthening.”
Eunice Tsang, Senior Research Analyst at Colliers, says for investors, this convergence of factors signals more than stability, and it points to upside potential.
“As yields on other asset classes compress, well-located commercial property offers both income resilience and long-term growth prospects,” Tsang says.
“We expect to see a mild recovery in development consents and a steady flow of new projects through 2026. For investors, that means opportunities to secure quality assets in a market that’s regaining momentum.
“With economic stability returning and demand for quality assets rising, the commercial property market stands out as a sector capable of delivering steady returns in a low-rate environment. It is a sector poised for a period of sustained recovery and growth.”
- Supplied by Colliers
