A note from Jason Arnold, Group Executive, Origination – Pallas Capital
New Zealand’s commercial real estate (CRE) markets have faced challenging conditions but a turning point is emerging. Lower interest rates, stabilising labour markets, and non-bank capital stepping up where traditional banks pull back are reshaping the landscape for advisers and developers.
Why it matters now: Auckland and Christchurch are moving in different directions. Auckland remains cautious, demanding tactical plays around refinancing and residual stock, while Christchurch is seeing growth momentum in residential, industrial, and office sectors. Advisers and developers must align their strategies with each city’s cycle—and Pallas Capital is well-placed to help them do it.
Residential Projects
Auckland: Population grew by 7% from 2019 to 2024, but housing stock increased 10.3%, leading to oversupply in some apartment precincts according to real estate researcher Cotality. This has left developers hesitant to launch new projects – although CBRE reported an uplift in activity over the past quarter, indicating the start of a market recovery . Demand remains concentrated in pre-development loans for prime sites, but conservative loan to value ratios from the banks are constraining activity.
Key takeaway: Flexible funding for residual stock and pre-commitments are adding real value for developers.
Christchurch: Residential demand is firmer, supported by population growth, infrastructure recovery spending, and lower entry costs relative to Auckland. Pallas’ construction lending products are gaining traction here, with construction loans accounting for nearly 45% of new settlements in the latest quarter .
Key takeaway: For developers and advisers, the opportunities lie in townhouse and mixed-use residences where non-bank capital is moving faster than the banks.
Retail & Mixed-Use
Auckland: Retail sentiment remains patchy, with CBD foot traffic still lagging and discretionary spending under pressure. That said, mixed-use precincts in high-growth suburbs are drawing investor attention, particularly where developers can secure anchor tenants. Luxury retail, which accounts for 11.6% of Auckland retail property according to Ray White , offers opportunities. The City Rail Link, due to open in 2026, is also expected to support the market.
Key takeaway: Investor interest is shifting toward mixed-use precincts in high-growth suburbs as infrastructure projects like the City Rail Link approach completion.
Christchurch: Retail and mixed-use projects are showing stability, with steady local spending and smaller-scale developments aligned to community demand. Rental growth and incentives were stable over the first part of the year, according to CBRE’s analysis .
Key takeaway: In a steady market, repositioning older retail assets and structuring finance for suburban mixed-use hubs can be beneficial.
Industrial & Logistics
Auckland: Logistics assets are in demand. Over the first half of 2025, transaction volumes for industrial assets were the highest since 2021, according to CBRE . The country’s three largest industrial transactions were in Auckland. Institutional investors took over from private investors and developers as the most prominent buyers, with managed funds accounting for 41% of total transaction value in commercial assets and private investors accounting for 31% .
Key takeaway: Watch for emerging opportunities, while focusing on refinancing and residual stock loans to ride out near-term volatility.
Christchurch: While Auckland recorded the lion’s share of asset sales in the first half of 2025, the Christchurch market was also active, recording 18 asset sales – two of which were above $20 million . Industrial vacancy is low, and rents are holding firm. The market benefits from strong demand from logistics, manufacturing, and agribusiness tenants.
Key takeaway: With land more affordable than Auckland, developers are moving ahead with mid-scale projects. Advisers have an opening to connect clients with construction and pre-development facilities offered by non-bank lenders.
Office Market
Auckland: An ongoing flight to quality among office tenants saw vacancy rates in prime-grade offices decreased from 9.8% at the end of 2024 to 8.4% in June 2025, while rents and yields held steady, according to Colliers . Falling vacancy rates are expected to elevate rents over the coming months. Secondary spaces continue to suffer high vacancy rates, with lower rents and yields as a result.
Key takeaway: Advisers and developers can find opportunities in refinancing strategies and adaptive reuse.
Christchurch: Office demand is outperforming expectations, particularly in prime space. The city has benefited from post-quake renewal and a modern office stock that is more aligned with tenant ESG and quality requirements.
Key takeaway: Advisers can help developers access construction lending for new projects and landlords to refinance stabilised assets.
Market Outlook: Two Cities, Two Cycles
The contrast between Auckland and Christchurch is clear. Auckland remains subdued, with cautious investor sentiment creating tactical plays focused on refinancing residual stock, and adaptive reuse. Advisers and developers should watch for further green shoots of a market recovery.
Christchurch is holding up comparatively well, underpinned by residential and industrial demand, along with post-quake reconstruction in the office sector. Here, advisers can lean into construction lending, pre-development funding and mixed-use projects, with non-bank lenders like Pallas Capital providing the speed and flexibility the banks won’t.
For advisers and developers, the message is simple: match your strategy to each city’s cycle. In Auckland, it’s about protecting value and accessing alternative credit, while positioning for an upswing. In Christchurch, it’s about seizing growth momentum with the right capital partners.
Active across New Zealand, Pallas Capital is supporting advisers and developers navigate these divergent markets by providing tailored funding solutions that match each city’s unique CRE dynamics. To explore funding that brings your project or investment to life contact one of our originators lending@pallascapital.co.nz
Jason Arnold
Group Executive, Origination
Pallas Capital