Non-residential building construction capital expenditure

IBISWorld forecasts non-residential building construction capital expenditure to decline by 0.1% to $7.58 billion in 2025-26, as earlier momentum from post-pandemic investment and strong business spending has faded. Subdued economic growth have encouraged firms to rein in capital expenditure, particularly on discretionary office, retail and hospitality projects. A softer pipeline of non-residential building consents has further constrained activity, limiting work flowing through to construction sites. Public sector restraint has compounded these pressures, with fewer new government-backed projects entering the market. While construction cost inflation has moderated, residual labour and material costs continue to weigh on margins, reinforcing caution among investors and contributing to the downturn in non-residential construction during 2025-26.

Commercial projects have dominated non-residential building construction over the past five years. In December 2025, they represented 48% of the total value of planned non-residential construction, followed by industrial at 11%, education 11% and health at 7%. The private sector remained the largest investor, contributing 67.3% of planned construction value, while the Central Government (Te Kawanatanga o Aotearoa) accounted for 18.8% and local governments contributed 13.9%.

The cooling residential construction market continues to weigh on non-residential building activity, as fewer housing developments reduce demand for supporting retail, office and industrial facilities. Elevated interest rates across much of 2024 and 2025 have constrained access to finance and weakened project viability, prompting businesses to defer or scale back capital spending. Softer economic conditions and heightened uncertainty have also encouraged caution among investors, particularly for discretionary commercial developments. While construction cost growth has moderated, persistently high labour and compliance costs continue to pressure margins. As a result, non-residential building construction capital expenditure has softened in the near term. Nevertheless, easing monetary policy and a gradual lift in business confidence are expected to support a modest recovery over the medium term, with IBISWorld forecasting capital expenditure to expand at a compound annual rate of 3.2% over the five years through 2025-26.