Australia’s commercial real estate sector is gaining ground, fuelled by fresh capital and renewed investor confidence.
CBRE’s latest Pacific Market Outlook report predicts investment volumes will grow by 15% in 2025 to $36 billion, followed by a further 23% jump to $44 billion in 2026.
This upswing is expected to drive sector-specific gains of 25% in office, and 10% in both industrial and retail in 2024.
We spoke with CBRE experts to unpack the forces behind this momentum and what they mean for Australia’s key commercial sectors.
Office Market: Signs of Recovery
Investor interest in Australia’s office market is rebounding, with Sydney leading the way.
According to CBRE’s Pacific Head of Capital Markets, Office, James Parry, the renewed confidence is driven by strong fundamentals in the CBD, where prime grade vacancies are low and few new developments are expected this decade.
Falling borrowing costs and an estimated 30% drop in office pricing since 2022 are also improving investment returns and boosting confidence in underwriting.
Meanwhile, Brisbane is also attracting attention, thanks to strong occupier fundamentals and the momentum building ahead of the 2032 Olympics.
“Interestingly, Melbourne, which has been battered by a slower office recovery and increased state taxes on office owners, is now attracting increased interest from some buyers who feel it is showing value based on recent pricing,” Mr Parry said.
Mr Parry expects the remainder of 2025 will see the investment market continue to recover from a very challenging three years.
“However, once this period is clearly in the rearview mirror, we are well positioned for a far more optimistic 2026, when sales volumes are expected to return to or exceed long-term averages,” he said.
Industrial: Sydney and Brisbane Lead the Pack
With the nation forecast to need an additional 6.2 million square metres of industrial floorspace over the next four years, attention is firmly fixed on logistics hubs in key growth corridors.
Chris O’Brien, Executive Director of CBRE’s Industrial and Logistics, Capital Markets division, said Sydney and Brisbane were the markets to watch, while Melbourne’s market remains cautious.
“Foreign Owners Land Tax has had a detrimental impact on off-shore interest for industrial assets in Melbourne,” Mr O’Brien said.
Despite rental growth beginning to moderate in some areas, the sector’s fundamentals remain solid.
“It is still seen as a defensive asset class with low vacancy and still positive rent growth and returns when compared with competing sectors,” he said.
Investor interest was currently strongest in core assets.
“The deepest pool of capital, and hence investor demand right now, is for core plus opportunities, whereby there is still an ability to extract strong rent reversion through pending lease expiries,” Mr O’Brien said.
Looking ahead, he expects momentum to build across all major markets, including Melbourne.
“We believe investor demand will continue to be strong for logistics across Australia, and for volume to improve strongly for Melbourne, notwithstanding current conditions,” he said.
Retail: Defying the Odds
Despite cost-of-living pressures and changing consumer behaviours, Australia’s retail sector is holding ground.
Strong foot traffic, steady sales and limited new development are driving investor interest in well-located centres with resilient tenant mixes.
Kate Bailey, CBRE’s Head of Retail and Alternatives Research, said the sector’s ability to adapt to past disruptions is reinforcing confidence among investors.
“The retail sector has proved itself as a stable market, able to traverse challenges in recent years,” she said.
With shopping centre occupancy at 95% and CBD retail vacancies expected to tighten, competition for space is likely to increase.
“The downwards trend in CBDs is expected to continue off the back of a return to work, population growth and tourism, with new developments in many of Australia’s capitals expected to drive an uptick of foot traffic and leasing activity,” she said.
Limited new regional and subregional supply is also expected to support rental growth in existing centres.
“Strong population growth will help support sales densities in existing centres as the catchment of each centre grows,” she said.
Read more CBRE insights here https://www.cbre.com.au/insights/articles/australian-investment-volumes
