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Commercial property investment is rising in Australia, driven by strong investor sentiment, high yields, industrial sector growth, and increased offshore interest.
The commercial real estate market in Australia has seen a decent rise as investors increasingly diversify their portfolios.
The first half of 2025 reported a 13 per cent rise in commercial property transaction activity from the same period last year.
As highlighted in CBRE’s latest Capital Flows Report, a total of $15.5 billion in office, industrial, retail, hotel, and living assets changed hands.
Helping propel this growth was the industrial and logistics sector, which recorded $5.4 billion in transactions in 1H25, up 98 per cent from the same period in 2024.
Retail also drove figures, with transactions up $4.7 billion, 29 per cent higher than 1H24.
Other sectors, such as offices, reported a decline, falling 11 per cent year on year.
Australian head of capital markets research, Tom Broderick, said investors are increasingly driven to commercial property due to higher yields.
“The simple answer is yield. Commercial property offers higher yield than residential typically, so returns can be higher. However, the price point is typically higher for commercial and risk can be higher also, like higher vacancy risk,” he said.
“Over the long-term rents typically rise with inflation, so commercial real estate can be a bit of a hedge against inflation.”
Investors are seeing safe investments in the industrial market. According to Broderick, vacancy in this sector is low.
He added that there is a limited supply pipeline across sectors like retail and office, which is likely to result in solid rental growth over the medium term.
Flint Davidson, CBRE’s Pacific head of capital markets, said Sydney availability is scarce, resulting in a shift to other cities.
“Capital continues to back the logistics and retail sectors leading to increased volumes, while in office increased pricing expectations off the back of sound rental growth have created a pricing mismatch, which has reduced volumes,” said Davidson.
“As we have seen in previous cycles, the availability of opportunities in Sydney has diminished and capital has had to shift to markets including Brisbane, Melbourne and Perth to find value.”
Also highlighted in CBRE’s report is the growing demand for offshore investment. According to the data, there was a 17 per cent year-on-year rise in offshore commercial property investment, making up 28 per cent of the total capital deployed in Australia.
“The office sector continued to be the primary target in H1, attracting 45 per cent of the total investment from offshore groups, boosted by recent price adjustments and the significant scale individual office assets offer,” Broderick said.
“Industrial and logistics also witnessed substantial foreign investment in H1, indicating broad appetite for this sector.”
This article was first published on REB’s sister publication, Broker Daily.
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