Insights from PMG’s 2025 Outlook series: Survive or thrive?

PMG had the privilege of hosting many of our valued investors, partners, tenants and suppliers at our recent Outlook 2025 series. In the face of a shifting global and geopolitical economic environment, the consensus across all events was clear – 2025 is shaping up to be a year of cautious optimism. With business confidence steadily improving and the commercial property sector entering a new phase of opportunity, those who act early will be best positioned to capitalise on this market cycle.

Facilitated by PMG General Manager Investor Relationships Matt McHardy, our panel discussions provided in-depth regional and national insights into the commercial property market, emerging investment trends, and the macroeconomic forces shaping the year ahead.

The key takeaway? We are at a turning point. Those who position early can put their money to work in an asset class poised to deliver higher yields and long-term growth. While the market continues to evolve, standing on the sidelines may mean missing out on key opportunities in what is set to be a transformational year.

Other key themes:

Interest rate shifts and its knock-on effects

With Brad Olsen, Chief Executive and Principal Economist at Infometrics touting inflation as being “back in the box”, the current environment is one of cautious optimism, presenting investors with the opportunity to reevaluate and reposition their portfolios for a lower interest rate environment.

Across the board, the economic outlook was considered to be gradually improving, with signs of increased activity expected in the second half of 2025. Interest rates are forecast to continue declining, potentially reaching 3.25% by December 2025, but are unlikely to return to pre-2021 levels. Instead, we are entering a new normal, where neutral interest rates are expected to remain 3-4% higher than previous cycles.

At the same time, term deposit rates are also falling, reducing the appeal of cash-heavy portfolios. As a result, investors are increasingly looking toward higher-yielding asset classes, including commercial real estate (CRE), to maximise portfolio performance.

Over the last 30 years, NZ CRE has steadily increased in value (4.3% compound growth per annum), despite the ups and downs of economic cycles. With the market now at or near the bottom of the current cycle, proactive capital allocation and active portfolio management will be key to capturing income growth and capital appreciation in the years ahead.

Globalisation to Protectionism

Another key theme across the events was how global economic shifts are shaping New Zealand’s outlook, with discussions focusing on trade, investment flows, and geopolitical risk. The changing of the guard in US politics, ushering in a second Trump term, was highlighted as a wild card on the global macro-economic front.

A Republican-controlled Congress is expected to implement expansionary fiscal policy, trade tariffs, and business-friendly tax cuts, moves that could stimulate the US economy but also accelerate global protectionist trends. This shift away from globalisation is creating rising trade barriers and greater uncertainty for export-driven economies like New Zealand.

After being, as Mark Lister defined it, in a “per capita recession” for the past two years, rising unemployment and a lot of businesses still struggling, things will likely ease in the latter half of the year.

Throughout the event series, panellists reinforced that while global volatility remains a challenge, New Zealand’s CRE market continues to be an attractive destination for capital seeking stability and long-term returns.

The next tech revolution: AI, quantum computing and sustainability

We are in the midst of the sixth major technological revolution, marking a new era of AI-driven productivity, automation, and energy transformation.

The rapid advancement of technology, and specifically its impact on commercial real estate was a key discussion point. AI and automation are already transforming logistics, finance, and building management, and this trend is only accelerating.

A major theme across the panels was the growing demand for high-quality, technology-enabled real estate. Similarly, sustainability was highlighted as a key focus area, with a clear consensus that carbon-neutral buildings, green financing, and energy-efficiency will become a fundamental part of investment strategies moving forward.

Businesses are increasingly prioritising smart, flexible and energy-efficient spaces, and as evidenced by tech stocks continuing to perform strongly, the focus on intelligent buildings and sustainable workplaces will likely continue to accelerate.

2025: Gearing up for growth

It was encouraging to see a shared sentiment that 2025 is a year for cautious optimism, with business confidence gradually improving and the commercial property sector entering a new phase of opportunity.

As the market shifts, those who act early will be well-positioned to capitalise on emerging trends, making this a pivotal moment for investors looking to secure long-term growth.

Disclaimer: The information in this article is of a general nature and was current at March 2025. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice. Please seek advice from a licensed financial advice provider before making any investment decisions.