Falling interest rates are setting up a decisive shift of capital out of bank deposits and back into commercial property, with syndicators and property funds likely to re-enter the market in force.
As term deposit rates retreat, ‘mum & dad’ investors are searching for higher-yielding alternatives, with commercial property syndicators and fund managers likely to be the main beneficiaries of this capital shift.
Jorge Chang Urrea, research manager at CBRE, said the company’s latest analysis puts the current average commercial and industrial property yield in New Zealand at around 7%.
This compares favourably to one-year bank term deposit rates, which have settled at around 3.4% to 3.5% (as at October 2025) after peaking at just over 6% in October 2023.
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As pricing expectations converge in the commercial property market, more active bidding is likely to come from syndicators and funds, and also from private investors as they look to put capital to work, said Brent McGregor, CBRE executive chairman.
“The persistent price gap between vendors and buyers has been one of the contributing factors to the lower transaction volumes of the past few years. That dynamic is changing fast as debt costs reduce, creating an attractive yield spread.”
With more investors shifting out of deposits, syndicators in particular will be back in the market, pursuing assets able to deliver a marketable distribution level relative to the alternatives. CBRE is picking that these groups will also gain confidence and will begin to bid for assets requiring larger equity raise programmes.
“The combination of cheaper debt and a growing requirement to place capital points to a much more competitive buy-side over the coming months and into 2026.”
Alex Nikolaou, CBRE’s director of debt & structured finance, said the lending market is also finally opening up for commercial property investors and developers.
“Banks and non-bank lenders are more willing to review deals than they were a few months ago. Interbank competition is increasing, and sub 5%pa debt cost is shaking up the lending market.”
Market expectations for the OCR point to another 25bps cut, with the rate then potentially holding for the next 12 months, he said.
“Lower debt costs should improve interest cover metrics and broaden the pool of bankable transactions, particularly for quality assets with stable income,” Nikolaou said. “The theme now is deployment, with syndicators and funds moving from watching to acting. Increased engagement from lenders is the catalyst the market has been waiting for.”
- Supplied by CBRE
