After two years of turbulence, the NZ Commercial Property market is regaining its rhythm. Transaction activity is rising, interest rates are easing, and investor sentiment is strengthening.

Over the past 18 months, the Official Cash Rate has fallen from 5.5% to 2.5%. This shift in the cost of capital impacts valuations and yields across the commercial sector. As debt becomes cheaper, yield expectations have begun to stabilise, but not uniformly. The compression seen in 2021–22 has not returned, and it is unlikely to do so in the short term.

What we are witnessing instead is a flight to quality. Prime-grade assets featuring strong tenant covenants and defensive income profiles are again commanding premium prices. This revaluation has caught some investors off guard. Those seeking “bargains” in A-grade stocks are finding fewer opportunities. The gap between book value and achievable price has narrowed significantly as confidence returns to the upper end of the market.

Inflation has eased to less than 4%, confidence is slowly improving, and banks are re-opening credit lines for institutional-grade assets. Supply remains structurally constrained, particularly in the logistics and industrial sectors, where vacancy rates in key Auckland and Christchurch precincts stay low.

Construction volume remains constrained due to high material and labour costs. Meanwhile, the lease market for existing properties, particularly for industrial and large-format retail, continues to firm.

Even during a “recovery” phase, competition for realising actual value remains. Capital is flowing back into the market, targeting the same small pool of premium assets.

At NetProperty, we’re seeing increased activity from Australian and Singaporean investors who recognise the structural advantages of New Zealand’s market: smaller, less volatile, and offering compelling yield relative to risk.

For investors, this means the window for acquiring assets at discounted pricing is closing. Well-located industrial and essential-service retail assets are being tightly held, and value-add opportunities in existing properties now require sharper execution and a longer time horizon.

The opportunity today isn’t in chasing distressed sales, it’s in strategic repositioning and disciplined acquisition. We see continued upside in properties that can adapt to market trends, particularly those offering scalability, retrofit potential, and redevelopment optionality.

The market reset is largely complete. The following 12-18 months will favour fund managers who can execute. With interest rates easing, offshore capital re-engaging, and supply still structurally limited, the next phase of New Zealand’s commercial property cycle will reward those who position themselves early and think long term.

NetProperty’s advantage lies in our ability to move decisively, backed by a long-term capital base and deep regional relationships. As one of the only South Island-based property fund managers with national reach, we understand both the local nuances and institutional dynamics that shape value.

Our approach remains simple: acquire strategically, manage actively, and create enduring yield through hands-on oversight and capital discipline.