The future of commercial property is looking bright

23 Mar 2021

By Zoltan Moricz

At our recent CBRE Market Outlook: Restart the Uneven Recovery event we discussed the outlook for key market sectors within Auckland around supply, demand, vacancy and yields.

If the GDP forecast for 2021 meets the predicted 4-5% economic growth, then the rose-tinted glasses may become a reality for the commercial property sector.


Within the investment sector we have seen a positive trend. H2 vs the last five year average continues to show the strength and depth of the New Zealand market. Industrial investment has been the highlight of sales volumes (34% in H2 2020 compared to 19% average over past decade) which has shown investors’ change in focus onto this sector.


Market liquidity has become a key factor with global levels of dry powder sitting at approximately $250 billion. New Zealand continues to be considered a key market to invest in, but there is a disconnect between the high demand from investors looking to buy and the fewer wanting to sell.

New Zealand is already ahead of global trends in industrial yields, which are below the office sector.

Vacancy is low within the industrial and logistics sector delivering strong and balanced demand and supply. This will continue to underpin strong buyer demand and investment performance.


Our predictions: Strong liquidity and low interest rates have compressed yields over the past six months especially for the industrial sector. Given the amount of dry powder continuing to seek real estate investment opportunities and the interest rate outlook CBRE forecasts that yields still have some room to firm in 2021 and 2022.

While industrial is seeing the biggest increase in investor demand, there are also good opportunities in office and retail which is not so fully or aggressively priced as industrial.



Retail property sales, particularly large format retail, have remained strong overall since COVID-19, due to evolving retail spending trends. The future of bricks-and-mortar retailing is assured. The post-lockdown bounce back of retail sales has surprised on the upside and this, combined with the expected level of economic growth and the boost from tourism once borders are reopened, bodes well for post-COVID-19 trading.

The challenge for retailers as well as retail property owners is how best to adapt to an omnichannel model as the online portion of overall retail spend continues to increase. Surveys by Retail NZ indicate that 77% of retailers now have an online presence compared to 53% pre-COVID-19.

Our prediction: CBRE expects retail operations to converge into a single model known as Phygital — physical and digital — involving the unification of e-commerce and bricks-and-mortar stores to cater to consumer demand for convenience, speed and cost.

The retailers who had online presence during COVID-19 realised the positive impact, so technology will continue to be central to this sector’s future success. Retail occupiers and investors are advised to develop closer relationships and shift away from being purely transactional and towards becoming true partners. Collaboration, innovation and differentiation will be the keys to success in the future of retail.

CBD office


As we revealed in the most recent MarketView report, COVID-19 impacts on Auckland CBD office vacancy levels in the second half of 2020 were less than many people expected earlier in the year. The material portion of new vacancy in the second half of 2020 was brought on by new supply coming into the market, with yet-to-be-occupied new space and the ‘backfill’ impact of occupiers relocating to new buildings contributing to nearly half of the vacancy increase. The majority of this is in Premium and A-grade space where demand is highest.

The main area where COVID-19 has had an impact is in secondary grade assets, where predominantly hospitality and education organisations have gone under.

Our prediction: A trio of influences will impact on office vacancy in the short-medium term; structural workplace shifts, economic growth, and supply.

How the office is being used may lead to softer demand than normal in the short-term. However, many of the overseas remote working trends do not apply the same way or extent in New Zealand. Cultural factors and our lockdown experience indicate that the future of office is stronger in New Zealand than the global norm. This combined with predicted economic growth means that organisations will need to weigh up the space they have and what their future needs will look like when they take into account business and personnel growth notwithstanding the move towards more hybrid forms of working. On this basis CBRE believes that office has a compelling future.