Confidence is building across the commercial real estate sector. While economic challenges persist, momentum is shifting and well positioned investors stand to benefit from improving conditions.
At PMG, we saw this sentiment echoed at our recent Outlook 2025 events across New Zealand. We were able to glean some great insights on this shifting landscape and the trends that will drive economic growth in 2025 and beyond with economists and industry experts indicating a landscape where proactive strategies can yield significant rewards.
Economic landscape shifts
Monetary policy remains a key driver of market activity. Inflation is moderating and with the Official Cash Rate (OCR) forecasted to decline from its current 4.25 per cent to around 3.00% by year end, borrowing conditions will likely improve.
We are already seeing some green shoots arise from this with many investors reassessing their portfolios, moving from cash holdings into assets with stronger return potential. However, the global economic picture remains somewhat complex. In the US, policy shifts under the new Trump administration are expected to cast ripples across the global economy – time will tell the outcome of this uncertainty.
Rising sovereign debt levels and ongoing geopolitical tensions add further uncertainty. The consensus coming out of our Outlook 2025 panels was that New Zealand will need to maintain a diversified trade strategy to ensure resilience amid changing global conditions.
Windows of opportunity
Market cycles create windows of opportunity and, for commercial property, that window is now open. With the commercial real estate market considered to be at, or around, the bottom of its cycle, there remains opportunity to invest at good value before the next upswing.
High quality prime, premium and A-grade commercial real estate remains in limited supply. As business confidence rebounds in 2025, the demand for these undersupplied assets are expected to grow, driving rental income and property values upward. This trend can position commercial property funds for stronger performance in 2025 and beyond.
Value-add strategies drive returns
Challenging conditions have put pressure on passive landlords and undercapitalised owners. Savvy investors are taking advantage of this, acquiring assets at attractive pricing and implementing value-add strategies.
Enhancements – such as targeted refurbishments, energy efficiency upgrades, and asset repositioning – are unlocking higher rental yields and long term value.
Technology and sustainability
Commercial real estate is evolving and investment in technology and sustainability are no longer optional considerations but fundamental investment drivers.
Smart building technologies are enhancing operational efficiencies, reducing costs and improving tenant experience. Sustainability initiatives – ranging from energy performance upgrades to carbon reduction strategies – are now critical to reducing operating costs and maintaining asset competitiveness.
Properties that meet these higher expectations will continue to attract premium tenants and command stronger returns.
Positioning for the upswing
Market shifts create opportunities but timing is key. With borrowing conditions set to improve and demand for quality space intensifying, the current phase presents a compelling case for investors prepared to move early and decisively, while taking a long term investment view.
Disclaimer: The information in this article is of a general nature and was current as at 27 March 2025. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice on whether or not an investment in one of its funds is right for you. Please seek advice from a licensed financial advice provider before making any investment decisions.
Related: Economic and commercial real estate outlook for 2025
