What’s in the commercial mix for 2026

Bayleys business line leaders expect broadly improving prospects across the commercial real estate market as the year unfolds, driven by business confidence, economic reforms and government policy initiatives, improving GDP metrics, and well-performing rural and regional economies.

Commenting in Bayleys’ latest Total Property portfolio, Ryan Johnson, national director commercial and industrial says while the market won’t move dramatically in the next 12 months, optimism is now founded more on reality than hope.

“There’s broadening confidence in the wider economy, a rise in business sentiment, a lift in employment activity, and non-residential building activity is forecast to rise steadily.”

Johnson says commercial real estate makes sense to buyer groups across the spectrum from entry-level to high-net-worth individuals, through to family office, superannuation fund managers, syndicators and global active capital.

“From a cost of debt versus return on investment perspective, commercial real estate is streets ahead of other investor options right now.”

Bayleys national head of occupier strategy and solutions, Steve Rendall, says corporate occupier sentiment is now more confident in the Auckland market.

“Generally, the larger occupants are looking to downsize slightly while simultaneously taking on more efficient, higher quality and better-located space, but there are plenty of encouraging growth stories in the small to medium enterprises (SME) occupancy market.

“We anticipate an undersupply of A-grade office space in the coming 12 to 18 months, although not all larger opportunities have been absorbed yet.”

Rendall says development projects underway by heavyweights including Mansons, Cooper & Co., and Precinct will alleviate some of the projected undersupply, although timing remains a challenge, with bigger occupiers nonetheless urged to allow plenty of runway if considering relocation.

Rents are forecast to increase, and fixed annual rental increases are expected to nudge towards 3.5 percent, particularly where landlords have funded fitout.

Bayleys national director office leasing, Matt Lamb, notes a positive shift in corporate occupier sentiment, with the flight to quality remaining paramount.

He says A-grade office supply is tightening in most major centres as demand improves and the forward pipeline remains constrained, while few speculative projects are proceeding without strong pre-commitment, meaning the repositioning of existing buildings is increasingly filling the supply gap.

“The country’s office market is now clearly two-tiered, with modern, well-located buildings outperforming secondary stock, and quality, well-positioned buildings with amenities leasing faster with less reliance on incentives.

“Prime office rents are firming nationally, modest rental growth is expected through 2026, and fixed annual rental increases are edging up for quality space.”

Lamb says sentiment is improving but still cautious in Wellington, Tauranga is one of the stronger regional growth markets, Hamilton has steady occupier demand, and occupier sentiment is stable and positive in Christchurch.

Bayleys national head of retail, Chris Beasleigh, says while retail spend is still cautious, lower interest rates and an improving employment market should improve consumer confidence.

“Big box retail continues to outperform other sectors, and we anticipate this will continue through 2026. International brands are scouting for optimal space in Auckland, Christchurch and Queenstown, and pleasingly there’s been an uptick in high street and hospitality sector leasing.”

Beasleigh says some big retail property sales were concluded last year and global indications are that the sector is undergoing a bounce-back.

With business confidence rising, Bayleys national director industrial and logistics, Scott Campbell, expects to see a lift in industrial leasing and sales activity through 2026.

“Sub-lease inventory is being absorbed, and big decisions are being made by tenants across business types. Larger developers are searching for land opportunities, offshore buyers are back, and there’s plenty of private capital looking for a home.”

Campbell says the industrial sector takes a hit when retail spending is subdued, so as household confidence improves, demand for warehousing, distribution and logistics assets will also pick up.

“While some sectors exercise caution in an election year, our historic sales data shows that industrial property is not traditionally impacted so we’re expecting deal numbers to improve in 2026.

“We also believe the proposed replacement bills for the Resource Management Act, along with the National Infrastructure Plan, and funding for the Roads of National Significance programme, will impact the industrial sector positively.”

Lower interest rates and clear indications that New Zealand tourism is returning to pre-pandemic levels will propel enquiry and activity in the hotels, tourism and leisure sector (HTL) sector this year, says Bayleys national director HTL, Wayne Keene.

“I expect first-time enquiry to increase as confidence grows, and we’re already seeing renewed activity from seasoned domestic and offshore investors.

“The government’s new policy settings, including the Business Investment (BIV) and Active Investor Plus visas, are starting to gain momentum, and in turn encouraging business owners to come to the market.”

Keene says innovative lines of capital are emerging, and the Bayleys HTL team is currently dealing directly with a fund focusing solely on tourism assets.

A stronger year for business mergers and acquisitions is also anticipated, with Bayleys national director business, William Cheong, saying improved economic fundamentals and strategic government policy initiatives are driving investment.

“While there are still residual challenges in the market, we foresee an influx of dormant and overseas money returning to the market.”