The New Zealand commercial property market is still adjusting to seismic shifts from the past few years, and this year, Landlords face heightened risks as business liquidations surge. In 2024, roughly 2,500 companies went into liquidation – the highest annual figure since 2014 and an increase of nearly 700 more than in 2023 (interest.co.nz). Liquidations spiked 38 percent year-on-year into January 2025, led by hospitality and construction businesses.
Why 2025 feels different:
- Cost‑of‑living pressure and weak cash flow – households have tightened belts, squeezing discretionary spending. Retail and hospitality firms, especially those dependent on foot traffic, are folding faster, driven by slowed consumer demand and slim margins;
- COVID hangover and hybrid work – demand for traditional CBD retail and office space remains soft as remote or hybrid models persist. This structural shift continues to outweigh any recovery momentum; and
- High interest rates and bank scrutiny – sensitive cap rates and financing pressures discourage new leasing and development. Many Landlords are reluctant, or financially unable, to cut rents, fearing valuation declines and lease covenant breaches.
What Landlords should watch and address:
- Review rent and lease terms. Vacancies in secondary retail and office assets remain elevated. Yet some landlords keep asking rents rigidly high, even as spaces lie dark for months, amplifying risk;
- Screen tenant financial health. We cannot stress this point enough! Given rising liquidations, vet prospective tenants carefully. A business with prior companies wound up in liquidation may present increased credit risk. Use guarantees and security appropriately and be ready to enforce swiftly if issues arise;
- Reposition or retrofit secondary assets. Lower‑grade offices and CBD retail often struggle without updates. Landlords should consider upgrading energy, amenity, or layout credentials – or pivot industrial/warehouse‑style reuse where demand remains stronger;
- Engage legal expertise early. Prepare standard lease documentation for fast turnover: clear terms around rental and OPEX arrears, guarantor obligations, lease termination, make-good clauses and compliance. Early legal review helps avoid disputes and supports stronger tenant onboarding; and
- Factor increasing vacancy and liquidity risk into portfolio planning. With thousands more company failures, the danger of prolonged vacancies or rent write‑offs is real. Reflect that in valuation assumptions and maintenance planning.
In Summary:
2025 looks different in the commercial property sector. The sharp rise in business liquidations, propelled by cost‑of‑living shocks and persistent structural change (especially retail and office demand), has challenged many Landlords. Yet this article isn’t just about exposure – it’s also about opportunity. Landlords who rethink pricing, diligently screen tenants, proactively enhance assets, and streamline legal preparedness stand the best chance of emerging resiliently. Thoughtful legal partnership with Tenants to ensure rights, leases, risks and liabilities for both parties are clearly managed, can be the difference between a sustained vacancy and a stable tenancy. In a world where tenants may be vulnerable and market conditions volatile, Schnauer & Co’s legal guidance offers clarity, protection and strategic positioning.
Call us today or email Ali Dymond for a no-obligation chat.