Developers gearing up to build more commercial and residential projects

Colliers is confident that better times lie ahead for the troubled property development sector, which would augur well not just for developers but also investors and tenants.

“Development activity is slowing as large-scale projects initiated in recent years reach completion. The slowdown reflects the impact of a weak economic backdrop on occupier demand, as well as ongoing constraints in the construction sector. A decline in building consent issuance highlights the weakening in short-term development intentions,” according to Colliers.

“Looking further ahead, however, prospects for a transition to the next growth cycle are improving. The economy is expected to gain momentum as 2025 progresses, interest rates are declining and inflationary pressures on building costs are moderating.”

Colliers noted that while the development sector had struggled in the face of high financing costs and rapidly rising building costs, there had been welcome improvement on both fronts, due to a sharp fall in interest rates and a significant reduction in the growth in building costs.

“While the data discussed above indicates that development activity will remain subdued in the short term, the easing of financial constraints and a lift in occupier demand – driven by the economy returning to growth – are likely to strengthen development intentions later in 2025,” Colliers said.

As a result, confidence in the building sector had been improving.

“Results from the latest Quarterly Survey of Business Opinion (QSBO) show that sector confidence, as of the December quarter of 2024, stood at 29, the highest level recorded since March 2017. According to the latest Ministry of Business, Innovation and Employment (MBIE) National Construction Pipeline report, New Zealand’s construction pipeline is projected to grow by approximately 15.5% between 2025 and 2029, reaching $63.7 billion.”