New Zealand’s commercial property market is entering 2026 with renewed confidence, buoyed by a combination of lower interest rates, easing inflation, and improving economic indicators.
As the economy swings into a recovery cycle, investing in the workspaces that underpin our economy is an increasingly attractive option.
For investors seeking stable returns, this productive sector offers highly attractive assets.
Economic tailwinds are driving momentum. The Reserve Bank’s recent cut to the Official Cash Rate to 2.25 per cent has lowered borrowing costs significantly, creating a stimulatory environment for investment.
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“Interest rates are now well below neutral levels, which means the Reserve Bank is actively supporting economic activity, and encouraging savers to rethink where they have their money,” says Hamish Fitchett, National Director of Research & Economics at Colliers.
“This shift is filtering through to improved business confidence and a greater appetite for property investment.”
Lower interest rates enhance the appeal of commercial property’s yield spread.
With traditional savings and term deposit rates under pressure, commercial properties are offering returns that outpace many alternatives.
According to Reserve Bank statistics, $167 billion of deposits will reprice in the next six months, likely at lower interest rates, which will prompt investors to consider higher-yielding opportunities.
“Commercial property not only delivers better income than term deposits but also provides the ability to leverage funds and amplify returns,” Fitchett says.
Investor sentiment is on the rise, while enquiry levels and transaction activity have picked up, reflecting optimism about the year ahead.
Forecasts point to low inflation, steady GDP growth, and improving labour market conditions, all of which underpin a period of sustainable expansion.
“Fair value models suggest yields are realigning with long-term performance levels, which is reassuring for investors focused on fundamentals.”
Darcy Tim, Director of Debt Advisory at Colliers, says banks are back in the game and the lending appetite for commercial property is strengthening, supported by robust liquidity and moderating insurance premiums.
“We’re seeing increased competition among lenders, including offshore institutions, for quality development and investment opportunities,” Tim says.
“Lower interest rates ease debt-servicing stress, improving repayment capacity and making commercial property finance more accessible.”
The Reserve Bank’s latest Credit Conditions Survey confirms demand for commercial property lending is returning, while its Financial Stability Report highlights a low level of risky lending in the sector.
These factors, combined with strong bank resilience, point to sustained credit availability for investors.
Global uncertainties, from geopolitical tensions to tech stock valuations, do pose potential downside risks.
Yet, as Fitchett says: “Most risks never materialise, and the data suggests we’re past the bottom of the current cycle. Businesses are planning for growth, and property investors are positioning themselves to take advantage of favourable conditions.”
As 2026 approaches, commercial property stands out as a sector offering income resilience, capital growth potential, and diversification benefits.
For investors seeking a hedge against volatility and a pathway to superior returns, the message is clear.
The cycle has turned, and the fundamentals are there to support a prolonged period of stable economic growth and expansion for the years ahead.
- Supplied by Colliers
