Markets are in flux. Interest rates are easing, but financial conditions remain tight. Geopolitical and trade tensions continue to add complexity – even as local conditions begin to stabilise.

As monetary policy adjusts and property markets find their footing, recovery is underway – but it’s likely to be steady, not sharp.

Confidence is returning but with discipline. Capital flows are realigning as investors reassess risk and return in a lower interest rate environment. We’ve gathered a snapshot from JLL New Zealand and ASB on the key forces shaping property investment decisions in 2025.

Commercial property trendsChris Dibble – Head of Research and Strategic Consulting at JLL New Zealand.

Key insights from JLL:

• OCR cuts are boosting activity – Early signs from Q1 2025 point to increased investor and tenant activity, though momentum is tempered by global economic uncertainty.

• Leasing momentum is building – Tenant movement and demand are rising across office, industrial, and retail, with prime office, logistics, and large-format retail proving most resilient.

• Long-term trends are shaping strategies – Sustainability, hybrid work, demographic shifts, and AI integration are key considerations in commercial property.

• Global trade developments add complexity – Recent changes in international trade policy are introducing new factors for businesses to consider in their property strategies.

“We are at a definitive transition point where market sentiment has visibly shifted,” says Chris. “Renewed leasing and investment activity is emerging, aligning with growing market confidence. Anticipated OCR reductions in 2025 support this momentum, suggesting the property recovery cycle will continue – albeit cautiously due to global economic factors.

“Beyond these cyclical shifts, structural changes such as AI, sustainability, and demographic evolution will have lasting impacts. The adaptability of market participants continues to drive activity and innovation across sectors, even as we navigate global trade uncertainty.

“Recent changes in international trade policy are introducing new factors for businesses to consider in their property strategies, prompting a reassessment of location choices, accessibility requirements, and space utilisation.

“Companies are now factoring in potential expansion or contraction scenarios based on evolving trade dynamics, while landlords are increasingly focused on securing and retaining high-quality tenants who can navigate these complexities effectively.”

Chris adds: “While uncertainty around tariffs and trade policy may create short-term volatility in financial markets, commercial real estate can act as a stabilising force in investment portfolios. Its tangible nature and income-producing characteristics – alongside longer holding periods and contractual cash flows – provide some insulation from immediate market fluctuations.”

Evolving economic environmentNick Tuffley, Chief Economist – ASB

• Inflation is finally tamed, and interest rates are falling but the slowdown caused by rate hikes means recovery will take time.

• 2025 will bring recovery in growth, jobs, and the property market as lower interest rates start to take effect.

• Trump’s trade policies will be a big influence. These policies could hurt NZ’s key trading partners, such as China, but they could also potentially tilt the growth mix more toward domestic drivers.

• Interest rates may now fall below a ‘neutral’ level as the RBNZ responds to impacts from the trade war, providing the property sector with more support.

• Business confidence has recovered but trade-related uncertainties could prompt some short-term caution.

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“The hardships of recent years have been caused almost entirely by high interest rates needed after the huge stimulus sprayed around when the pandemic hit. Just as higher rates slowed things down, lower rates will pick things off the floor.”

“Look ahead to a year of gradual increases in foot traffic and revenue in shopping outlets, more demand on floorspace in offices, and the usual need for industrial property to keep pace.  If the trade war gets bad, interest rates will fall that much further.  

It’s an environment that will help commercial property prices lift, but not at the speed at which the US can roll out tariff announcements!”