Commercial update – November 2024

Commercial real estate activity in Hamilton is expected to see a boost in the second half of 2025, if recent residential sales success is anything to go by.

That’s the message from Lodge Commercial Sales and Leasing Specialist Dean Abraham, who says commercial real estate trends are heavily influenced by the residential market.

“Commercial real estate is slower to wind down and crank up, but now that we’ve seen the residential market pick up after a couple tough years, there’s every sign 2025 will be a positive year for commercial sales and leasing.”

Dean says cashed-up investors are the driving force behind the recent increase in commercial activity.

“Basically, we’ve got investors that have been comfortable getting six per cent in the bank for two years now starting to see deposit interest rates head south so they’re looking for alternatives to keep building their nest egg.

“Provided you can get past the bank’s stricter lending criteria and the numbers work, by buying commercial property you end up owning a really nice asset over a period of time”

Dean says the availability of industrial lease stock in Hamilton is still sitting around 2-3%, an historic low, while office and retail space in the CBD remains plentiful. 

He also expects the north and south fringes of the city to present ongoing industrial opportunities for some years to come.

“The costs to develop and build centrally are high, eye-wateringly so, but the areas surrounding the city have significantly cheaper base costs in terms of development contributions and annual rates costs. Combine that with our fastest-growing city mantle and expected population growth, and areas such as Horotiu and Rukuhia could get the rub of the green in years to come.”

Conversely, ongoing changes in retail and office environments have resulted in a “mind-boggling” number of vacancies in the central city.

“There’s been a desire from retailers and offices for smaller footprints, which has resulted in a trend for compact, but higher-spec, spaces. Obviously, they’re looking at their P&Ls and responding to the market around them, but with this downsizing has come a lot of empty space in the CBD.”

Dean says changes in behaviour and increased economic investment could change this, but his outlook is realistic. “It’s not a trend I see reversing anytime soon.” 

Despite a lack of commercial sales data, which Dean says is a result of lower transaction volumes and off-market deals, things are looking up for 2025.

“Unlike the residential real estate market, which is filled with hard data and up-to-date sales figures, we tend to view commercial sales from an anecdotal perspective.

“So, what we’ve seen is commercial sales activity increase in recent months, largely driven by investors, and we expect lower interest rates to swing the pendulum back to owner/occupiers later in 2025.

“It’s fair to say the commercial market, like the residential market, has bounced off the bottom, and I think from here we can expect a continued, gradual improvement.”