Chapter 2
Themes
CBRE New Zealand Real Estate Market Outlook 2025
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Key Themes Shaping New Zealand's Real Estate Market in 2025
This section delves into the key themes shaping New Zealand's commercial real estate market in 2025.
Discover how investor intentions are evolving, with a surge in interest from APAC investors and shifting preferences towards office and retail assets.
Learn about the easing consolidation pressures for office and industrial occupiers as well as the growing appetite for residential development lending. Uncover the role of sustainability in driving occupancy rates and the challenges faced by apartment developers.
Dive into the full details and in-depth analysis of these trends below.
Investment Intentions Improving
Net buying intentions reached 13% in CBRE’s APAC Investor Intentions Survey, driven by substantial increases in most markets outside mainland China. Selling intentions pulled back from 2024’s all-time high of 44% to 40% in 2025. Buying intentions increased by the same magnitude, rising from 49% to 53%, marking the third highest level of buying intentions recorded in the last decade.
These trends should bring a welcome liquidity boost to New Zealand’s investment landscape given our market’s reliance on offshore capital for a large portion of our institutional grade investment and development opportunities although book values that may not fully reflect underlying market value adjustments over the past three years could present a barrier.
For more insights on how investors are currently perceiving the market, read the full 2025 Asia Pacific Investor Intentions Survey report
These trends should bring a welcome liquidity boost to New Zealand’s investment landscape given our market’s reliance on offshore capital for a large portion of our institutional grade investment and development opportunities although book values that may not fully reflect underlying market value adjustments over the past three years could present a barrier.
For more insights on how investors are currently perceiving the market, read the full 2025 Asia Pacific Investor Intentions Survey report
Rising Investor Interest in Offices, Retail and Alternatives
Industrial and office assets are most sought by investors. However, compared to past trends, interest in industrial properties declined slightly once again along with the trend of moderating industrial rents after a strong period of growth.
After three consecutive years of weaker interest, investors’ preference for office assets in 2025 has picked up marginally. With occupier leasing activity in some CBD markets stabilising or showing signs of growth, investors are returning to the sector after a period of inactivity. Markets providing rental growth prospects and markets where the price gap between buyers and sellers has narrowed will be most active for office investment in 2025.
The living sector remains popular, with build-to-rent and build-to-sell opportunities attracting strong interest. However, across the APAC region, a lack of investable assets outside of Japan and Australia has led to interest in this asset class stabilising after strong growth in demand over the past few years. The living sector nevertheless remains resilient as ongoing structural change continues to underpin investor demand.
Retail remains largely out of favour, but investors are continuing a positive shift towards it. 9% of investors currently rate retail as their preferred sector for investment, up from 4% in 2023.
After three consecutive years of weaker interest, investors’ preference for office assets in 2025 has picked up marginally. With occupier leasing activity in some CBD markets stabilising or showing signs of growth, investors are returning to the sector after a period of inactivity. Markets providing rental growth prospects and markets where the price gap between buyers and sellers has narrowed will be most active for office investment in 2025.
The living sector remains popular, with build-to-rent and build-to-sell opportunities attracting strong interest. However, across the APAC region, a lack of investable assets outside of Japan and Australia has led to interest in this asset class stabilising after strong growth in demand over the past few years. The living sector nevertheless remains resilient as ongoing structural change continues to underpin investor demand.
Retail remains largely out of favour, but investors are continuing a positive shift towards it. 9% of investors currently rate retail as their preferred sector for investment, up from 4% in 2023.
Lending appetite is growing with the biggest improvement for residential development
Lending appetite is growing, especially for construction/development lending. The most notable change is the more positive attitude of domestic banks. While industrial remains the most preferred asset class for development with 65% of respondents placing industrial in their top three asset exposures, with appetite particularly strong among international lenders, the most notable changes were for residential.
Half of domestic lenders named terraced housing as their top exposure for construction lending. Appetite for residential land subdivision is also strong among domestic lenders, with three domestic lenders naming it as their most preferred exposure.
In contrast, apartment developments were the top pick of only one international lender. However, there is appetite for apartment lending with half of lenders placing it in their top four preferred exposures (of eleven).
There is generally lower appetite for less mainstream areas such as data centres and healthcare, although there are exceptions with five lenders ranking data centres in their top four and one domestic lender ranking healthcare as their most preferred exposure.
For more insights on the commercial investment and development lending landscape see the full report of our lenders survey based on responses from 23 domestic and international bank and non-bank lenders active in the NZ market: New Zealand Lender Sentiment Survey 2024
Half of domestic lenders named terraced housing as their top exposure for construction lending. Appetite for residential land subdivision is also strong among domestic lenders, with three domestic lenders naming it as their most preferred exposure.
In contrast, apartment developments were the top pick of only one international lender. However, there is appetite for apartment lending with half of lenders placing it in their top four preferred exposures (of eleven).
There is generally lower appetite for less mainstream areas such as data centres and healthcare, although there are exceptions with five lenders ranking data centres in their top four and one domestic lender ranking healthcare as their most preferred exposure.
For more insights on the commercial investment and development lending landscape see the full report of our lenders survey based on responses from 23 domestic and international bank and non-bank lenders active in the NZ market: New Zealand Lender Sentiment Survey 2024
Two-year swap rate movements to have the biggest influence on yields in 2025
While 10-year bond rates show a strong long-term relationship to property yields, there are two notable periods (2010~2013 and 2020~2024) where the CBRE model's accuracy in predicting yields diminished. In both, the main difference between the model's predictions and the actual data is the speed of change around the market cyclical turning points. To address this issue, we have refined our approach by modelling these specific periods to better capture turning points. Figure 8 shows how our refined model enhances forecast accuracy, particularly for the last four years, which witnessed a sudden and significant change in interest rates.
Importantly, in predicting yield movements since 2020, the model replaces 10-year bond rates with two-year swap rates, as the latter had a more substantial influence over this period. These findings are crucial for predicting yields in upcoming quarters. The additional insight is that whilst market rental growth prospects influence yields, interest rate movements trump the influence of potential rental growth. Interest rate's influence on yields is 2.6 times stronger than rental growth.
For more insights on CBRE’s research analysis of how property yields respond to rent and interest rate changes and what this implies for future yield movements see the full New Zealand Market Yield Outlook Update report.
Importantly, in predicting yield movements since 2020, the model replaces 10-year bond rates with two-year swap rates, as the latter had a more substantial influence over this period. These findings are crucial for predicting yields in upcoming quarters. The additional insight is that whilst market rental growth prospects influence yields, interest rate movements trump the influence of potential rental growth. Interest rate's influence on yields is 2.6 times stronger than rental growth.
For more insights on CBRE’s research analysis of how property yields respond to rent and interest rate changes and what this implies for future yield movements see the full New Zealand Market Yield Outlook Update report.
Increased KiwiSaver allocations could boost liquidity in New Zealand
Institutional real estate allocations in New Zealand lag Australia, especially in relation to unlisted, direct real estate investments. While the New Zealand Super Fund increased its allocations in recent years after developing a long-term strategy for real estate investment, very little KiwiSaver investment has been flowing into direct property.
This appears to be a missed opportunity to optimise funds’ risk-return metrics given that direct property investments have distinct characteristics that provide benefits to a balanced portfolio.
Unlisted property and infrastructure are less prone to short-term market volatility and have historically produced better risk adjusted returns. With the rapid growth in total KiwiSaver funds under management, exceeding $110 billion in 2024, greater allocations into direct real estate would also bring a welcome injection of liquidity into the industry.
CBRE Research’s Superannuation Fund Asset Allocation Trends report features more detailed insights and commentary on super fund allocations to real estate, highlighting further trends and opportunities.
This appears to be a missed opportunity to optimise funds’ risk-return metrics given that direct property investments have distinct characteristics that provide benefits to a balanced portfolio.
Unlisted property and infrastructure are less prone to short-term market volatility and have historically produced better risk adjusted returns. With the rapid growth in total KiwiSaver funds under management, exceeding $110 billion in 2024, greater allocations into direct real estate would also bring a welcome injection of liquidity into the industry.
CBRE Research’s Superannuation Fund Asset Allocation Trends report features more detailed insights and commentary on super fund allocations to real estate, highlighting further trends and opportunities.
Consolidation pressure is easing on office space footprints
The latest New Zealand Office Occupier Survey reveals a positive turn in occupiers' real estate strategies.
When we look more specifically into the potential changes to office footprint size, we see a shift from last year’s trends. Relocation strategies are now less about reducing space. Only 29% of respondents are planning to decrease their footprint, a significant decrease from 47% last year. This change is reflected in the increase in respondents who are not planning any change to their footprint (45%) and those planning to expand (26%).
Despite the current soft economic conditions posing a short-term challenge to positive absorption, our survey results show resilience in leasing activity, indicating the likelihood of a rebound in demand as the economy improves.
Relocation intentions indicate a busy leasing market with 39% of occupiers pursuing or planning a relocation strategy. Flight-to-quality is the leading reason for relocations, but location, amenity and resilience/sustainability drivers are also important.
The CBRE New Zealand Office Occupier Sentiment Survey provides insights from 160 corporate real estate executives. Their organisations represent 18 industry sectors and occupy more than 428,000sqm of office space across Auckland, Wellington, and Christchurch, with a headcount of more than 31,000 people.
When we look more specifically into the potential changes to office footprint size, we see a shift from last year’s trends. Relocation strategies are now less about reducing space. Only 29% of respondents are planning to decrease their footprint, a significant decrease from 47% last year. This change is reflected in the increase in respondents who are not planning any change to their footprint (45%) and those planning to expand (26%).
Despite the current soft economic conditions posing a short-term challenge to positive absorption, our survey results show resilience in leasing activity, indicating the likelihood of a rebound in demand as the economy improves.
Relocation intentions indicate a busy leasing market with 39% of occupiers pursuing or planning a relocation strategy. Flight-to-quality is the leading reason for relocations, but location, amenity and resilience/sustainability drivers are also important.
The CBRE New Zealand Office Occupier Sentiment Survey provides insights from 160 corporate real estate executives. Their organisations represent 18 industry sectors and occupy more than 428,000sqm of office space across Auckland, Wellington, and Christchurch, with a headcount of more than 31,000 people.
Higher environmental performance correlates with higher occupancy metrics
Higher environmental performance for properties correlates with higher occupancy metrics – but not universally. A positive relationship between high environmental ratings and high occupancy performance is most evident at the top end of the market. Sustainability credentials are amongst office occupiers' top ten priorities, although occupiers take a broad and holistic view of building and locational requirements, where sustainability is one of several criteria by which office premises' suitability is evaluated.
There are also clear opportunities to drive greater demand for green space. Three quarters of current occupiers in lower quality space not having a firm view if they would pay more to be in a sustainable building provides scope for better engagement with this market segment.
Even at current demand levels, the market is arguably undersupplied with sustainable building stock. Nearly a third of Auckland occupier sentiment survey respondents seek 5 and 6-star Green Star rated spaces and are willing to pay a rent premium for these. This demand base exceeds current Auckland office stock that is 5 or 6-star green rated, highlighting the potential for growth in the sustainable real estate market.
CBRE’s comprehensive quantitative building and occupancy data, coupled with our survey of occupier sentiment, offer invaluable insights into the current market approach to building sustainability. See our full report here: Auckland CBD Office Space and Occupier Market Sustainability Analysis
There are also clear opportunities to drive greater demand for green space. Three quarters of current occupiers in lower quality space not having a firm view if they would pay more to be in a sustainable building provides scope for better engagement with this market segment.
Even at current demand levels, the market is arguably undersupplied with sustainable building stock. Nearly a third of Auckland occupier sentiment survey respondents seek 5 and 6-star Green Star rated spaces and are willing to pay a rent premium for these. This demand base exceeds current Auckland office stock that is 5 or 6-star green rated, highlighting the potential for growth in the sustainable real estate market.
CBRE’s comprehensive quantitative building and occupancy data, coupled with our survey of occupier sentiment, offer invaluable insights into the current market approach to building sustainability. See our full report here: Auckland CBD Office Space and Occupier Market Sustainability Analysis
Apartment launches will lift but for a niche subset only
The development environment post housing market peak of late 2021 has been incredibly challenging for developers. Early downturn challenges around obtaining finance, cost escalation from high inflation, consenting delays, and global supply chain issues have largely resolved however a more fundamental barrier to development has emerged with the extreme difficulty in obtaining presales from buyers. Presales are a key risk reduction requirement from banks as part of their lending criteria but with only 8 presales Auckland wide in Q4 2024, this presents a major roadblock.
The reason for low presales is that most off plan apartment buyer groups are inactive. Investors are limited by bank lending loan to value rules and now debt to income rules. Falling property values have helped yields, however flat rent growth and high cost of debt have made short term property investment less attractive than previous years. First home buyers are also affected by higher debt costs, which has the double whammy of being applied to the higher cost of new builds stemming from recent construction cost inflation.
Apartment developers have pivoted to small scale projects which reduces presale risk, targeting downsizer owner occupier buyers at the wealthier end of the market who are less affected by housing and interest rate cycles and are more lifestyle/life stage focused. Catering to this highly discerning demand base however requires developers to be extra careful in their approach to location and product specification.
Although interest rates are declining, it will take time for these changes to translate into lower effective mortgage rates. The underlying weakness in the economy is also contributing to difficult development conditions. Consequently, we do not expect a widespread recovery in apartment launches until 2026 but there will be an increasing focus on Prime grade opportunities this year.
The reason for low presales is that most off plan apartment buyer groups are inactive. Investors are limited by bank lending loan to value rules and now debt to income rules. Falling property values have helped yields, however flat rent growth and high cost of debt have made short term property investment less attractive than previous years. First home buyers are also affected by higher debt costs, which has the double whammy of being applied to the higher cost of new builds stemming from recent construction cost inflation.
Apartment developers have pivoted to small scale projects which reduces presale risk, targeting downsizer owner occupier buyers at the wealthier end of the market who are less affected by housing and interest rate cycles and are more lifestyle/life stage focused. Catering to this highly discerning demand base however requires developers to be extra careful in their approach to location and product specification.
Although interest rates are declining, it will take time for these changes to translate into lower effective mortgage rates. The underlying weakness in the economy is also contributing to difficult development conditions. Consequently, we do not expect a widespread recovery in apartment launches until 2026 but there will be an increasing focus on Prime grade opportunities this year.