Chapter 2
Themes
CBRE New Zealand Real Estate Market Outlook 2025
10 Minute Read
10 Minute Read
Looking for a PDF of this content?
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.
Eight Key Themes
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.