Understanding the Commercial Real Estate Landscape in 2025

The commercial real estate sector is undergoing transformation, shaped by economic shifts, evolving tenant expectations, the increasing importance of technology and more. To gain a clearer picture of market trends, investment priorities, and operational challenges, this report presents key findings from a survey of commercial property owners, managers, and investors across New Zealand.

This survey represents a diverse cross-section of the NZ CRE industry, capturing insights from seasoned professionals with extensive portfolios to newer investors entering the market. The findings shed light on market confidence, investment strategies, lease trends, and the adoption of technology and sustainability initiatives in 2025.

The sentiment toward New Zealand’s commercial real estate market in 2025 leans strongly toward optimism, with 55% of respondents expressing confidence. However, a significant portion remains neutral at 36%, signalling a cautious approach.

The outlook for New Zealand’s long-term commercial real estate market is strong, with 93% of respondents expressing confidence to varying degrees.

Key Opportunities in the New Zealand Real Estate Market in 2025

New Zealand's 2025 commercial real estate landscape offers a diverse range of opportunities. Investors are capitalising on improved financing conditions to make strategic acquisitions at attractive prices, particularly in high-demand sectors like industrial, retail, and premium office spaces. Sustainability and mixed-use developments are emerging as niche segments, with increasing recognition of their long-term value potential.

Additionally, opportunities in redevelopment and distressed assets present avenues for value-add strategies. By aligning their investment strategies with these core themes — while staying mindful of market challenges — landlords and investors are building resilient, high-performing portfolios in a dynamic market.

Sector-Specific Recovery and Growth – Targeted Investments for Resilient Sectors

• Diverse Asset Focus: Investors are targeting specific sectors such as Auckland retail and office, industrial, logistics, hospitality, and storage/distribution properties.
• Premium Office and Retail: Strategic assets in key urban centres, particularly in Auckland, continue to attract attention due to strong tenant profiles and location advantages. There is optimism around A-grade office rents and retail spaces, as shifting work patterns and a return-to-office directive may gradually boost demand. A-grade office rents are expected to gradually increase as sectors such as government agencies mandate staff return to physical offices, reducing work-from-home arrangements. This is anticipated to reduce vacancies and increase the sqm rate, with a phased impact expected over the next 3–5 years.
• Industrial Resilience: The industrial sector remains robust, fuelled by sustained e-commerce growth and expanding logistics networks. While core industrial rents have grown significantly, the rate per sqm may rise at a slightly slower pace.
• Hospitality and Other Sectors: Key opportunities are also emerging in hospitality, especially in central business districts like Christchurch, where local demand and tourism can drive performance.

Investors can capture value by targeting sectors with proven resilience and recovery potential, particularly in urban hubs where high-quality assets and tenant demand are strong.

The biggest challenges landlords and investors face in 2025

When assessing the challenges landlords expect to face in 2025, increased operating costs and interest rates emerge as the predominant issues, representing 27% and 23% of respondents respectively. Operating costs remain elevated — a lingering effect of previous inflationary pressures — driven by rising energy prices, higher labour expenses, and ongoing supply chain disruptions, which continue to challenge landlords in managing day-to-day expenses even as overall inflation begins to ease.

The RBNZ has cut the Official Cash Rate to 3.75% and signalled further reductions in 2025. This easing supports conditions for refinancing, investment, and portfolio expansion. Despite these favourable moves, interest rates are expected to remain a major challenge — 23% of respondents cite uncertainty about future rate movements, particularly in response to inflation fluctuation, and the unexpected resignation of Governor Adrian Orr adds a layer of uncertainty, potentially impacting the bank’s policy direction. Global rate volatility, driven by geopolitical tensions and shifting economic conditions across major economies, raises concerns that New Zealand could also face unexpected increases in debt servicing costs, which may affect both new acquisitions and the refinancing of existing assets.

Top Asset Classes for Growth & Stability in 2025

This section focuses on the asset classes landlords and investors currently see as offering the best opportunities for growth or stability in their portfolio in 2025.

Industrial, Warehousing & Storage – A Resilient Asset Class with Proven Stability

Industrial and warehouse tenancies remain one of the most stable and viable long-term investments across all regions in New Zealand. Investors continue to view industrial properties as a cornerstone of portfolio stability, offering consistent rental yields and strong tenant demand.

Sustained Demand: E-commerce growth and expanding logistics networks continue to drive strong demand for warehouses, big-box facilities, and smaller industrial units — particularly in Wellington, where supply constraints persist. In Christchurch, the industrial sector remains the standout performer in the commercial property market, while in Auckland, stabilising interest rates are expected to support rental growth as space availability tightens. Although rent increases are set to moderate following a period of rapid growth, industrial assets in core locations remain a dependable income generator.

Core Market Trends Causing Impacts on Tenant Demand

Success in 2025 will require agile leasing strategies. While the majority of tenant demand shifts are driven by economic conditions, there is also a meaningful impact from evolving work practices and sustainability considerations. Landlords who adapt by offering flexible layouts, sustainable upgrades, and tailored lease options will be best positioned to meet evolving tenant expectations.

Business Outlook

Primary Portfolio Goals for 2025

39% of respondents are focused on maximising revenue growth, reflecting a strong emphasis on increasing rental yields, improving lease structures, and enhancing asset performance.

30% aim to expand their portfolios, highlighting ongoing interest in strategic acquisitions.

28% are prioritising operational efficiency, suggesting an increased focus on cost reduction, improved property management processes, and investment in smart building technologies to improve margins.

While tenant retention remains a lower priority, those investing in long-term relationships and improved service offerings may secure stronger occupancy rates in competitive markets.

Technology in Commercial Real Estate

83% of landlords cite that operational efficiency is the key focus in 2025, with an aim to increase the property manager to tenancy management ratio, boosting margins and reducing costs. To achieve this, landlords should embrace cloud-based property management software where AI, automation and analytics are embedded to streamline operations.

Core Technology Tools in Property Management Strategies

• Property management software is the most critical tool (29%), streamlining key event tracking, tenant communication, maintenance, and property reporting. Modern platforms are aiding performance through AI & automation embedded throughout workflows, helping landlords automate tasks, reduce costs, and improve asset management.
• Excel & spreadsheets remain common (27%), though they tend to lack scalability and integration.
• Accounting software (26%) plays a key role in financial management and oversight, particularly when integrated via two-way data syncs with property management software.
• 9% use additional tenant communication tools further enhance tenant engagement, while 5% utilise data analytics tools to support market insights and rental optimisation.

Sustainability Upgrades and ESG Initiatives 

Sustainability Upgrade Plans for 2025

For landlords pursuing minor upgrades, these improvements can deliver meaningful energy savings and improved tenant satisfaction without requiring major capital expenditure. Meanwhile, those investing in significant upgrades are positioning themselves for long-term value gains, aligning their assets with increasingly stringent environmental regulations such as NABERSNZ requirements for larger commercial properties. Conversely, landlords delaying upgrades may face competitive risks as tenant expectations shift and regulatory demands increase, particularly as New Zealand progresses toward a low-carbon economy.

• 52% of landlords are committing to smaller-scale improvements such as energy-efficient lighting, Aircon optimisations, or enhanced insulation.
• 39% do not plan sustainability upgrades in 2025, likely due to cost, regulatory uncertainty, or other investment priorities.
• 9% are committing to significant upgrades, such as renewable energy installations, major building retrofits, or significant energy efficiency overhauls.

ESG Initiatives in 2025

• 21% cite energy-efficient building systems as a core initiative in 2025. Landlords are prioritising upgrades such as improved Air conditioning, LED lighting, and insulation to reduce energy consumption and lower operating costs.
• Many investors (20%) are implementing comprehensive waste management strategies to minimise waste, enhance recycling efforts, and reduce environmental impact.
• A significant focus (19%) is on installing solar panels and other renewable energy systems to decrease reliance on the grid and lower energy expenses.