Commercial real estate turns the page on 2025

While Thrive in 2025 was an optimistic mantra for the property and business market to aspire to, New Zealand’s largest full-service agency, Bayleys, says reality had other ideas.

Ryan Johnson, national director commercial and industrial says 2025 was one of the biggest years of geopolitical uncertainty seen for decades, coming hard on the heels of a particularly tough commercial real estate cycle.

“Trump played his tariff cards and corporates held their breath, while for small-to-medium enterprises it was the cost of living crisis that bit hard.

“Auckland’s commercial real estate market has been a mixed bag and we’ve seen sector bifurcation with industrial proving sticky, retail gaining ground, office holding its own, and developers treading cautiously.

“It’s been difficult for valuers to get a handle on what properties and assets are worth, and on the sales’ side, the bid-ask spread hasn’t narrowed that quickly which has been a challenge.”

With much of the macro uncertainty now flushed through the economy, Johnson says confidence is rebounding for valuers, occupiers, vendors, investors, and developers with decisions being made based on risk and return rather than being thwarted by doom and gloom.

“The economy is a lot cleaner now. A raft of stimulatory economic and regulatory measures by the government with signalled changes to the earthquake prone buildings system, and revised immigration policy settings has helped, as has the easing of central bank monetary policy.

“Deal numbers show that the tide turned from July, and Bayleys has had one of its best years ever for commercial sales and leasing. Our Total Property portfolio listings were through the roof, we set many deal records, and recruited intelligently adding significant weight to our team across business lines.”

Bayleys’ head of insights, data, and consulting Chris Farhi says quarterly broker sentiment surveys note that buyers have been cautious about economic conditions and often facing issues securing finance. On the sellers’ side, agents have been focusing on aligning vendor price expectations with the market.

“Leasing has faced slower tenant decision making and tighter rental budgets, both driven by softer economic conditions, and landlords have battled to effectively structure rental terms and incentives to ensure proposals are competitive.” Farhi says sales’ settlement data to date shows 2025 has been largely consistent with 2024 from a volume perspective.

“However, there’s been a series of very high value transactions with either deferred settlement or late settlements which will take a while to show up in the data, so it’s likely that once those figures come through, 2025 may look better than 2024.

“On the value side, prices across most assets classes have moved sideways, and rents have followed suit, with some locations and sectors needing higher incentives to maintain face rents.

“Vacancy levels have risen in most markets, particularly for industrial which has slowed down after an extended buoyant period.”

Greater sales volumes are expected in 2026 off the back of lower interest rates, with Farhi saying this will generate a greater suite of comparables to help decision-making and further spark activity.

Scott Campbell, Bayleys national director industrial and logistics, and general manager Auckland commercial and industrial, says business picked up after a very slow first six months where recessionary conditions and subdued consumer spending dampened the logistics sector and rattled occupiers.

“This sluggishness started to dissipate in the second half of the year as OCR cuts put money back into household pockets. Trump’s tariff games gave many larger occupiers the speed wobbles earlier in the year, but occupiers had to play the ball in front of them and not second guess macro forces.”

Industrial rents stayed relatively flat throughout the year, and Campbell reports that large tracts of sub-lease space are starting to be absorbed.

“The development pipeline also slowed this year, but larger developers are back in the market now looking for land. American retail giant Costco’s decision to open a second New Zealand store in Drury speaks to the value of the market south of Auckland, further underpinning the golden triangle dynamic.

“We anticipate steady growth next year across the industrial and logistics sector as the economy recovers, and greater demand for office and retail leasing assets off the back of a pick-up in activity in the latter part of 2025.”

Carl Waalkens, Bayleys director valuation and advisory services says the market is showing early signs of stabilisation, albeit unevenly across sectors, after several years of volatility. Demand for quality assets in defensive sectors such as medical, logistics, and education has provided ongoing opportunities, particularly for portfolio and mortgage security valuations.

“The key challenge has been pricing uncertainty in development land, secondary assets – particularly office – and emerging asset classes where sales evidence has been sparse, often requiring more assumptions and sensitivity testing.

“Additionally, the rise in receivership work and mortgagee sales processes has reinforced the importance of transparent risk disclosure.

“We’ve also faced short-notice requests tied to refinancing and restructuring activity across the commercial sector.”

Waalkens says there has been an uptick in vacant possession instructions particularly for industrial stock, as landlords revisit asset positioning or owner occupiers seek opportunities to acquire.

“On the opportunity front, we’ve gained ground on market share through recruitment and expanded capabilities in plant and machinery and the rural sectors.

“The valuations team remains adaptive, cautiously optimistic, and focused on delivering trusted analysis in a volatile environment.”