Australia Commercial Property Market: Strong Growth, Shifting Demand & Strategic Opportunity

Market Overview

• According to IMARC Group, the Australia commercial property market was valued at USD 33.0 billion in 2024, and is forecast to grow to USD 78.5 billion by 2033, exhibiting a compound annual growth rate (CAGR) of ~9.3% over 2025-2033.
• Key types include Office, Retail, Industrial & Logistics, Hospitality, plus “others.” Growth is regional, with major metros like Sydney, Melbourne, and Brisbane leading, but with increasing activity in outer suburbs and regional centers.
• Drivers of this growth include strong economic fundamentals, rising population and urbanization, increasing foreign investment, infrastructure development, technological advancement, and a growing focus on sustainability in building design, operations and asset value.

Key Trends & Market Drivers

1. Industrial / Logistics Sector Booming

The rise of e-commerce and supply chain realignment has escalated demand for warehouses, distribution centers, and last-mile logistics facilities. Industrial zones near ports, transport hubs and outer-metro areas are expanding fast.

2. Retail Resilience & Transformation

After years of being challenged by online retail, brick-and-mortar retail property is showing signs of rebound. There’s growing demand for experiential retail, mixed-use precincts that combine retail, hospitality, and entertainment to draw foot traffic. Retail’s share of transaction volumes is increasing.

3. Hybrid Working & Flexible Office Demand

Office sector demand is shifting: vacancy rates in CBDs remain under pressure, but there’s growing interest in flexible office spaces, coworking, satellite offices in suburban locations as businesses adjust to hybrid work. Developers and landlords are rethinking space configurations, amenities, and lease flexibility.

4. Strong Preference for Sustainable & Certified Properties

Energy efficiency, green certifications (Green Star, NABERS, etc.), sustainable building features are becoming not just desirable but often required. Properties with sustainability credentials tend to attract better tenants, lower vacancy, and often command premium rents or valuation upside.

5. Regional & Secondary City Growth

Rising property costs in major metros are pushing demand into suburbs and regional centers. Transport infrastructure improvements, wider availability of services, and lifestyle preferences are helping shift where commercial property investment is directed. Secondary cities offer better yields and lower costs.

6. Positive Investor & Market Sentiment

The NAB Commercial Property Survey Q1 2025 shows property market sentiment is at an eight-year high, with many sector participants expecting capital values and rents to grow in the coming 1-2 years, especially if interest rates ease further.

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Opportunities in the Australian Commercial Property Market

• Logistics / Industrial Expansion

Developers and investors who focus on industrial projects—especially warehouses, last-mile fulfillment centers, cold storage—stand to benefit significantly, particularly in well-connected outer metro or near ports.

• Flexible & Hybrid Office Models

There is room for providers of flexible office, coworking, and mixed-use spaces to gain market share as businesses look for agility. Adapting older office stock into more flexible formats can add value.

• Retail Redevelopment & Experience-led Assets

Retail centres that can offer experiences, food & beverage, leisure, entertainment, and integrate digital/omnichannel strategies are likely to outperform pure retail assets. Repurposing or redeveloping aging malls, or incorporating mixed-use components, is a chance for value creation.

• Sustainable Building & ESG Investment Premiums

Investing in green building design, energy efficiency upgrades, and certifications can yield premium rents, lower running costs and stronger investor interest. Retrofitting older buildings or new developments with sustainability in mind will likely be rewarded.

• Regional & Secondary City Investment

Targeting properties in growing secondary cities and regional areas may offer higher capital growth potential and yields. These may include office/retail in commuter belts, industrial/logistics hubs serving growing regional populations, and mixed-use development that aligns with expanding local economies.

• Capitalizing on Improved Financing Conditions

With interest rate cuts expected or underway, borrowing costs could become more favorable. That gives developers and investors opportunities to finance new projects or acquisitions. Also, favorable tax changes (e.g. incentives) can support investment.

Recent News & Developments in the Australian Commercial Property Market

• Q1 2025 – NAB Survey: Sentiment at 8-year High

According to the NAB Commercial Property Survey in the March 2025 quarter, confidence in commercial property lifted to multi-year highs. Sentiment was positive in nearly all sectors and states (except some concerns in Victoria). Many professionals expect rents and capital values to grow in the next 1-2 years.

• 2025 – Surge in Commercial Investment Volumes

As per industry forecasts (e.g. from Cushman & Wakefield), investment in office property is expected to rebound in 2025, rising from approx AU$9.8 billion in 2024 to $13.3 billion nationally. Logistics and industrial investment are forecast to increase by ~40%, from ~$7.2 billion to $10 billion.

• Premium Property Outperformance

CBRE’s Pacific Market Outlook for 2025 predicts that premium commercial assets—top-quality offices in central business districts, inner-market logistics hubs, marquee shopping centres—will outperform in both capital appreciation and rent growth.

• Warehouse Rent Growth

Premium warehouse rents saw ~5% year-on-year growth in the first quarter of 2025, particularly in Sydney and Perth. Experts expect warehouse rents overall to rise in the 3-5% range nationally given tight supply and strong demand.

• Retail Transactions Rebounding

Retail property transaction volumes increased towards the end of 2024, representing about 41.1% of all commercial transactions, compared to a long-term average closer to 28%. This signals renewed investor interest in retail assets.

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• Commercial real estate in Australia is not just a passive asset; it’s undergoing structural shifts. Versatility, sustainability, and strategic location are becoming just as important as size or ownership.
• For investors, aligning with sectors showing strong demand (industrial/logistics, premium offices, mixed-use retail), and investing in green, certified buildings can offer resilient income and capital growth.
• Office owners and landlords who adapt to hybrid working trends—offering flexibility, amenities, and better tenant experiences—will likely maintain occupancy and valuation better than those who don’t adapt.
• Retail landlords and developers who can transform retail spaces into lifestyle or mixed-use centres will see better traffic, rents and values as consumer behavior evolves.
• Regional and secondary city markets, often overlooked, are gaining relevance as affordability, infrastructure improvements and population spillovers shift demand outward from major metros.