Insights | Simon Gordon, Director, Origination – Pallas Capital
Auckland’s commercial real estate market continues to navigate a period of adjustment. Softer residential market conditions, challenging pre-sale requirements, elevated construction costs and ongoing feasibility pressures are influencing development activity across the city.
Despite these headwinds, experienced developers and investors continue to pursue opportunities across both established assets and new projects, with funding remaining a key component in bringing developments to market.
Residential
Residential development activity in Auckland remains influenced by softer buyer demand and challenging pre-sale conditions. For many developers, securing the level of pre-sales required by traditional lenders continues to be a key hurdle, placing greater emphasis on project feasibility and funding structure.
Against this backdrop, Auckland was Pallas Capital’s most active residential lending marker between 1 July 2025 and 30 June 2026, with more than $186 million of loans settled.
Activity remains concentrated in established suburbs including Remuera, Orakei, Epsom and St Heliers, alongside growth areas such as Silverdale, Dairy Flat, Flat Bush and Karaka. These locations continue to be supported by population growth, infrastructure investment and long-term housing demand.
From a lending perspective, demand has been most prominent across pre-development and construction facilities, particularly where borrowers require a more flexible approach than traditional bank funding structures can provide. As developers navigate a more complex delivery environment, access to capital remains a key consideration in progressing projects from planning through to completion.
Key takeaway: While pre-sale conditions remain challenging, lending activity continues across established suburbs and growth corridors, with demand concentrated in pre-development and construction finance.
Mixed-use & Commercial
Enquiry remains steady for well-located, high-quality commercial assets across Auckland. This is reflected in Pallas Capital’s lending activity, with more than $166 million settled across retail, office, industrial, specialised and mixed-use assets between 1 July 2025 and 30 June 2026.
Retail ($53.6 million) and office ($43.0 million) assets accounted for the largest share of commercial lending activity, highlighting continued demand across Auckland’s established commercial property sectors.
At the same time, a clear distinction is emerging between prime and secondary assets. Higher-quality buildings are generally occupied by stronger tenants, making them more attractive to both investors and lenders. Secondary assets, by contrast, are facing a more challenging environment as vacancy begins to emerge in some parts of the market.
Key takeaway: The growing divide between prime and secondary assets is reinforcing the importance of quality, location and tenant strength.
Funding Trends
Pallas Capital continues to see strong enquiry from experienced developers, including many who would have traditionally sourced funding from the major banks.
The funding mix across Auckland reflects this broad-based demand. Between 1 July 2025 and 30 June 2026, investment facilities accounted for the largest share of lending activity at $175.2 million, alongside $88.6 million in construction lending and $58.1 million in pre-development facilities.
The data highlights activity is continuing across both established assets and new development opportunities. While pre-sale conditions and feasibility pressures continue to influence project timelines and funding requirements, borrowers continue to pursue opportunities supported by strong fundamentals and disciplined capital structures.
Auckland is also seeing fewer residual stock lending opportunities than in previous years, largely due to reduced development activity over recent years and fewer projects now reaching completion.
Key takeaway: Lending activity is being driven by both investors and developers, with demand continuing across investment, construction and pre-development facilities despite a more challenging market backdrop.
Looking Ahead
Interest rates will remain a key factor influencing Auckland’s property market outlook. While rates remain relatively low by historical standards, any future increases could test how effectively a softer market absorbs higher funding costs.
The impact on borrower sentiment, project feasibility and transaction activity will be closely watched. With pre-sale conditions remaining challenging and feasibility pressures continuing to influence development activity, funding costs are likely to remain an important consideration for developers and investors.
While broader market activity remains relatively subdued, experienced developers and investors continue to pursue opportunities across Auckland. The pace of activity over the coming months will provide a clearer indication of how the market responds to changing conditions.
Key takeaway: Interest rates, funding costs and borrower sentiment will remain key indicators to watch as Auckland’s market continues to evolve.
To explore funding solutions tailored to your next Auckland project or investment, contact one of our originators at lending@pallascapital.co.nz.
Disclaimer: General information only and not financial product advice. It does not take into account any person’s investment objectives, financial situation or needs. Past performance is not a reliable indicator of future performance. All forward-looking statements are provided as a general guide only. For wholesale investors only.