Leading the next cycle

A year marked by repricing, legislative reform and the early signals of a strengthening market.

The past year has been a transition year for the commercial property sector. 2026 marked the continuation of the recovery that began in 2024 and it has underscored how a market carrying debt across roughly 65 percent of commercial assets is recalibrating to a new funding reality. Moving from historically low interest rates to a more normalised cost of capital has demanded repricing, sharper discipline and a renewed focus on fundamentals. This is backdropped by an environment where the OCR is still moving toward neutral, reinforcing tighter funding conditions as the Reserve Bank continues its inflation-control cycle.

Offshore capital supports transaction activity

Even so, the commercial sector has continued to find opportunity. Transaction volumes have remained strong, and Bayleys has tracked ahead of 2025, supported by offshore enquiry from Australia, Singapore and other markets where buyers see value in New Zealand’s relative stability.

Tourism and the primary sector drive momentum

The broader economic story has also been encouraging. Tourism has delivered one of the standout narratives of the year, with international arrivals rising and new venues strengthening the country’s visitor proposition.

Separately, the primary sector has remained a pillar of economic strength, underpinning regional performance and supporting sentiment nationwide. The South Island has led much of this momentum, while confidence in the North Island has continued to lift. Together, these two engines have anchored the commercial market and will remain influential as we move into 2027.

Prime assets strengthen their advantage

Across the occupier market, net effective rents have shown where the real pressure sits. Incentives have surfaced in response to softer conditions in secondary-grade stock and in regions with elevated vacancy, allowing landlords to preserve face rents while still securing tenants. Net effective rents have therefore adjusted even as headline rates hold. The divide between prime and secondary assets has become more pronounced, underscoring the importance of functionality, efficiency and amenity.

Connecting capital with opportunity

For Bayleys, 2026 has been a year that demonstrated the strength of our full-service capability. Our ability to connect capital across sectors, regions and asset classes has been a defining advantage. Partnerships with Knight Frank globally, and McGrath in Australia, have extended our reach, while our national teams have provided insight and visibility across every part of the market. The world is becoming more connected, and Bayleys has leaned into that reality, strategically linking capital with opportunity in ways that reflect both global trends and local performance.

Property reforms reshape development

The legislative environment has also shifted. New earthquake-prone building legislation has sharpened the focus on compliance, cost and future use, while RMA and development levy reforms mark a major shift in New Zealand’s planning and infrastructure funding landscape, strengthening the foundations for commercial property investment. It is hoped that a more streamlined planning framework, clearer thresholds and a new Planning Tribunal will support faster and more predictable development pathways. Updated development levy rules, including independent oversight and standardised methodologies, will reduce cost volatility and ensure charges are reinvested locally. Collectively, these reforms should unlock land supply, improve feasibility and lift investor confidence in future delivery, and Bayleys’ national land development team is ready to support the projects that will follow.

The next commercial property cycle takes shape

The commercial property growth story is expected to gather pace in 2027. It will be a different kind of environment, led by improving productivity, the growing influence of AI, and the ongoing strength of tourism and the primary sector.

Bayleys enters this next chapter with a clear mandate to deliver great outcomes.

With the next cycle taking shape, now is the time to assess your position, explore the opportunities in this edition, and connect with Bayleys’ specialists to drive your strategy forward.