With 2024 a year best forgotten in commercial and industrial real estate circles given all-agency industry data showed the lowest number of sales transactions in decades, there are high expectations for the next 12 months across sectors.

Ryan Johnson, Bayleys national director commercial and industrial says growth is the word underpinning the outlook for 2025 and this applies to values, volume of transactions, sector-wide pipelines of activity and the overall economy.

“But don’t expect it to happen overnight – it will be a slow burn as the year unfolds, particularly on the value side of the coin.”

Johnson says Prime Minister Chris Luxon ramped up the coalition government’s pro-growth mantra in his recent State of the Nation speech, highlighting the new fast-track consenting legislation, the need for greater business competition, and the creation of an Invest NZ agency to attract foreign investment.

“A smoother pathway to gaining approvals under the Resource Management Act (RMA) and related legislation, coupled with improving economic fundamentals, points to a new development cycle in 2025.

“But in the background is the seismic story, with progress being made on the Building (Earthquake-prone Building Deadlines and Other Matters) Amendment Bill which seeks to get the balance right between public safety and costs to building owners when managing the risks of earthquake-prone buildings.

“It is clear that current legislation around remediation is not working effectively, with multi-layered regulations and lack of clarity for building owners. A new model for both new builds and existing buildings to mitigate earthquake risk and improve building resilience – proportionate with identified hazard zones – would be a game changer.”

Despite push-pull tensions and unsettled market conditions, the industrial sector rallied late-last year, and this is a portent of things to come according to Scott Campbell, Bayleys national director industrial and logistics.

“After a fairly sluggish run, December was a solid month for sales, especially for properties with sound tenant covenants. We expect that momentum to build this year and think building owners will be more inclined to be proactive and make decisions.

“With the flight to quality still prevalent among large-scale occupiers, demand will heighten for prime stock and regenerated interest in favourably zoned industrial land around the country suggests that the development market is edging back.

“Yes, there will be challenges as the market resets but improving economic dynamics will give occupiers more confidence and that will flow through to all parts of the industrial market.”

Confidence is the overriding factor that will determine the way the retail property sector performs this year too, says Chris Beasleigh, Bayleys national director retail.

“The year-on-year decline in retail spending has been confronting and while falling interest rates and disinflation are welcome, it’s not going to be a fix-all for retail.

“Profitability is touch and go for many retailers and with job insecurity another factor impacting disposable incomes, I think it will take until the back end of 2025 to see tangible light in the retail spending tunnel.

“For business owners, the traffic light system has been in play. It’s been all go for those in the green zone, on hold for those in the amber phase and dire for those retailers stuck on a red light.”

Retail space always has a churn factor, but new operators enter the market regardless of economic cycles. Beasleigh says occupiers now have plenty of choice across the location, quality and price spectrum – with some great stock available with existing fitout to allow operators to hit the ground running.

In the office market, Steve Rendall, Bayleys national head of occupier strategy and solutions says despite emerging optimism from tenants, a dearth of large-scale A-grade stock will be a challenge for many larger occupants.

“I think occupier confidence will build as the year progresses and the recessionary tail retreats. After a prolonged period of battening down the hatches, I expect corporates will turn their minds more acutely to what best-in-class office space looks like for their operation.

“A key sticking point for many larger occupants with lease expiries between late-2025 and 2030 will be the shortage of A-grade office space in Auckland – both existing and pipeline stock. While there are several new buildings underway or planned – many with occupier pre-commitments in place – the only ‘game changing’ new planned projects are Precinct Properties’ mixed-use development on the former-Downtown Carpark site and Cooper & Co’s development plans in Britomart.

“Both projects are of exceptionally high quality and will drive a significant shake up in occupancy across the CBD, but remain some way off completion, and in the interim we expect strong demand for what remains of the A-grade stock in Auckland.

“The lack of premium new space will drive interest and activity in established precincts like Wynyard Quarter – where new-build options like Manson TCLM’s 30 Daldy Street and the existing 151 Property Wynyard and Viaduct office properties are expected to benefit – and underpin demand for quality refurbished and repositioned office stock around the city.”

Wayne Keene, Bayleys national director hotels, tourism and leisure (HTL) says buyers in the sector are on the acquisition trail again and he feels 2025 will see more decisiveness and positivity.

“Enquiry and interest out of the US has mushroomed off the back of recent political and climate events, and our dollar is very favourable against the greenback,” he says. “The Trump effect will direct money our way, but there’s also been an upswing in activity out of Singapore which enjoys an easier pathway to ownership here.

“Elevated enquiry does not always translate to deals, however. While there’s a bit more confidence in the market, there’s generally a lag between sentiment and commitment and I don’t expect sales values to change significantly in the short to medium term. Funding hurdles also remain for the HTL sector with banks being conservative and risk averse.”

Keene says improved and expanded international flight schedules, a focus on attracting big name events to New Zealand, and promotional drives to bolster the off-season visitor trade will help the sector and drive transactions.