Published on and written by Cyril Jarnias
Commercial real estate in Australia is attracting a growing number of investors, drawn by favorable economic prospects and a dynamic market offering attractive return opportunities.
With cities like Sydney, Melbourne, and Brisbane leading the list of investment destinations, Australia offers a range of promising sectors spanning from office real estate to shopping centers and industrial spaces.
As the country continues to strengthen its infrastructure and appeal to international businesses, savvy investors find this market a fertile ground to diversify and maximize their portfolios.
Flourishing Opportunities in Australian Commercial Real Estate
Detailed analysis of the current growth in Australia’s commercial real estate sector
The Australian commercial real estate market is undergoing a transformation phase marked by a gradual recovery in investments, stabilizing values, and growth prospects stimulated by anticipated interest rate cuts and moderate economic recovery.
Key Market Statistics and Trends
| Indicator | Recent Value/Trend |
|---|---|
| Market Size (2024) | 34.07 billion USD |
| 2025 Forecast | 52.33 billion USD |
| Annual Growth (CAGR) | 5.32% to 8.46% depending on sources |
| Investment Volume (2024 vs 2023) | +1 billion USD in 9 months |
| Retail Share of Transactions (late 2024) | 41.1% (historical average: 28%) |
| Industrial Share of Deals (2023) | 60%, dropped to 50% in 2024 |
Key Booming Cities and Regions
- Sydney: Strong recovery in the office market (CBD), rising occupancy growth, increasing rents, appeal for industrial and logistics assets.
- Melbourne: Sustained revival of retail and offices, particularly around Bourke Street Mall, with expected growth in demand and rents.
- Brisbane: Highest forecasted prime rent growth (+12.1% expected in 2025), dynamism in the industrial and logistics sector.
- Perth and Adelaide: More moderate recovery but opportunities in the industrial and logistics sectors.
Property Types with High Profitability Potential
- Premium Offices (CBD, Grade A+): Recovery in demand linked to return-to-office policies, attractive yield rates (up to 6.36% in Perth’s CBD).
- Industrial and Logistics Parks: Structural growth driven by e-commerce and demand for modern, last-mile logistics facilities.
- Neighborhood Shopping Centers: Those anchored by supermarkets and health services are particularly sought after, with a return of investment in physical retail.
- Coworking Spaces and Flexible Buildings: Rapid growth in demand, adapting to evolving hybrid work models.
Emerging Trends
- Coworking Spaces: Represent a growing share of new transactions, stimulated by the flexibility sought by businesses.
- Energy-Efficient Buildings: Increased demand for “green” certified assets, particularly from institutional investors and large corporations.
- Office Transformation: Conversion of obsolete assets into residential or hotel spaces to address urban housing shortages.
Favorable Economic and Policy Factors
- Anticipated Interest Rate Cuts: Reduction in capital costs and stimulation of investment.
- Population Growth: Rising population, especially in major cities, supporting demand for retail and services.
- Political Stability and “Safe Haven” Status: Attraction of foreign capital (USA, Germany) despite the relative withdrawal of some Asian investors.
Challenges for Investors to Consider
- Local Regulations: Increased complexity for change of use, strict environmental standards, permit delays.
- Economic Fluctuations: Slowed GDP growth (0.2% in Q1 2025), geopolitical uncertainties, and persistent inflation.
- Vacancy in Certain Segments: Notably in CBD retail (up to 25% in Perth) and office market adjustment facing work hybridization.
- Limited Supply: Slowdown in new developments, risk of tension in certain markets.
Asia-Pacific Regional Comparison
| Country | 2025 Dynamics | Comparison Points with Australia |
|---|---|---|
| Australia | Recovery, stabilization, return of investments | Moderate growth, strong resilience |
| New Zealand | Slower growth, more restricted market | Slower catch-up, fewer investors |
| Singapore, HK | Relative withdrawal of overseas investments | Australia benefits from their disengagement |
| China | Volatile local market, fewer overseas investments | Australia considered a safe haven |
Key Takeaways
Australian commercial real estate is in a rebound phase, with solid prospects in major urban centers and promising segments like premium office, logistics, and neighborhood retail. Demand for flexible and sustainable spaces is shaping new opportunities, while caution is advised regarding regulatory and economic challenges.
Good to Know:
Sydney and Melbourne, with increased demand for offices and coworking spaces, show notable dynamism; while industrial parks in Brisbane display promising profitability, aligned with the energy-efficient push and policy support.
Exploring Available Types of Commercial Properties
Australian commercial real estate encompasses a variety of properties intended for professional and commercial uses, each presenting distinct characteristics, different profitability profiles, and specific market dynamics. Understanding the nuances of each category is essential for investors wishing to navigate this highly competitive market effectively.
Main Categories of Commercial Properties
Office Properties
Office buildings constitute the core of commercial operations in Australia and represent a significant share of sector investments. These spaces are intended for businesses providing professional services and can vary considerably in configuration, ranging from multi-story prime buildings in central business districts to small suburban offices. Investment-grade offices offer attractive yields: in the third quarter of 2022, prime office building yields reached 6.36% in Western Australia and 4.5% in New South Wales.
These properties typically include additional amenities such as end-of-trip facilities, kitchens, meeting rooms, toilets, and workspaces tailored to tenant needs. The value of offices heavily depends on their location, accessibility, and the quality of their facilities. In July 2022, approximately 40% of investments in Australian commercial real estate were directed to the office sector.
Retail Properties
Retail spaces are properties used for the sale or marketing of goods and services to consumers. This category encompasses a wide range from individual shops to large shopping centers or malls. Retail commercial premises, such as stores or retail spaces, must be located in areas with high visibility and accessibility to maximize customer traffic. These properties are particularly sensitive to consumer trends and overall economic health.
Industrial and Logistics Properties
Industrial spaces can be extremely large, used for manufacturing, storage, and logistics activities. At the other end of the spectrum, industrial properties can be smaller and sometimes present a mix of warehouse and office space. Typical tenants range from logistics distributors to goods-producing businesses. This category also includes standard warehouses, which emphasize storage space for holding products, which can then be shipped via loading docks or delivered to customers through a reception area.
A major development currently characterizes the sector: according to forecasts, the value of investment-grade industrial properties in Australia will surpass that of office buildings for the first time in 2026. This trend results from the increase in logistics real estate value and the construction of new, larger facilities, intended to accommodate e-commerce growth.
In July 2022, the industrial sector received approximately 18% of the country’s commercial real estate investments.
Other Categories
Australian commercial real estate also includes other property types such as hospitality and mixed-use activity spaces. These properties meet specific market needs and offer distinct investment opportunities.
Regional Differences and Market Dynamics
Commercial real estate transaction activities in Australia show significant regional concentration. In July 2022, approximately 45% of commercial real estate transaction activities took place in New South Wales, reflecting the predominance of the Sydney market. Western Australia, although less active, accounted for about 1.5% of the country’s commercial real estate transaction activities.
This regional concentration directly influences the availability and demand for commercial properties. Major metropolises like Sydney and Melbourne concentrate the largest commercial supply and attract global institutional investors due to strong office space demand, declining vacancy rates, and rising rents.
Urban versus Rural Locations
The importance of urban locations remains predominant in the Australian commercial sector. Central urban areas, particularly central business districts, offer the best prospects for yield and capital appreciation. Offices and retail spaces are mainly concentrated in urban centers or business districts, where their value heavily depends on location and accessibility.
Rural or urban fringe properties find their market rather in the industrial and logistics sector, where available space and lower costs become major attraction factors. This distinction reflects the differentiated needs of businesses: professional services seek urban proximity, while logistics and storage prioritize space and road accessibility.
Current Australian Market Trends
Sustainability and Environmental Certifications
The Australian commercial real estate market is undergoing a significant evolution towards environmental sustainability. Commercial properties with sustainability accreditations, such as NABERS ratings, Green Star certifications, or WELL standards, are increasingly attracting institutional investors. This trend reflects growing awareness of climate change risks and increased demand for environmentally friendly properties.
Technology and Innovation
The integration of technology into commercial properties is becoming an important differentiating factor. Investors and tenants are increasingly seeking spaces equipped with modern facilities, smart management systems, and advanced digital infrastructure. This evolution is part of a broader dynamic of digital transformation of workspaces.
Market Structure and Consolidation
The Australian commercial real estate market remains strong and highly competitive. A trend towards consolidation is observed, where small developers merge with large real estate developers or exit the market. Key players in the sector include Lendlease Corporation, Scentre Group Limited, Mirvac, PACT Construction, and Multiplex Constructions Pty Ltd.
Impact of the COVID-19 Pandemic
Although specific details of the pandemic’s impact are not explicitly developed in the available data, the crisis accelerated several structural market trends. The increased demand for e-commerce reinforced the importance of logistics and industrial properties, while remote work created downward pressure on some segments of the traditional office market. This dynamic partly explains why industrial properties are expected to surpass offices in value by 2026.
Future Outlook
| Segment | Trend | Timeframe |
|---|---|---|
| Industrial and Logistics Real Estate | Accelerated growth | Short to medium term (2026) |
| Office Real Estate | Stabilization with technological adaptation | Medium term |
| Retail | Transformation towards omnichannel | Ongoing |
| Sustainability | Mandatory integration | Starting from 2025 |
The future of Australian commercial real estate is on a trajectory of transformation. E-commerce growth will continue to stimulate demand for logistics and industrial properties, while the office sector will need to adapt by offering innovative and sustainable spaces. Savvy investors who understand these regional and sectoral dynamics, and who pay particular attention to sustainability and technology criteria, will be best positioned to capitalize on the opportunities offered by this constantly evolving market.
Good to Know:
Urban offices and retail spaces, with higher occupancy rates, are often favored, while industrial properties and warehouses, important for e-commerce, show solid profitability in rural areas. The pandemic accelerated technology integration and encouraged sustainable practices, thus changing the dynamics of commercial real estate in Australia with increased demand for flexible and eco-friendly spaces.
Analyzing Profitability and Associated Risks
Factors Influencing the Profitability of Investments in Australian Commercial Real Estate
The profitability of investments in Australian commercial real estate depends on multiple factors, both macroeconomic, structural, and regulatory.
Market Trends
- Sector Growth: Demand is particularly strong for data centers, industrial hubs, multifunctional retail spaces, and multifamily residences, stimulated by digital transformation, urbanization, and evolving consumer behaviors.
- Sector Value: In 2025, the Australian commercial real estate market is estimated at over 75 billion AUD, driven by population growth, rising consumer spending, and infrastructure development in regional areas.
- Rental Yields: Prime commercial real estate yield rates range from 4.3% (retail) to 5% (logistics). Grade A office rents are 20–35% above market, and net effective rent growth is expected in all major cities, with Sydney and Brisbane leading.
| Sector | Average Yield (Q1 2025) | Expected Rent Growth |
|---|---|---|
| Retail | 4.3% | Low to moderate (Perth, Sydney > others) |
| Offices | 4.7% | High (Sydney, Brisbane) |
| Logistics/Industrial | 5% | Strong, driven by e-commerce |
Vacancy and Supply: Vacancy rates remain under 5% for retail, and limited supply supports prices and rent growth, particularly for multifamily housing where vacancy continues to decline.
Economic Growth
Regional Dynamics: Regional markets benefit from economic diversification and infrastructure investments.
Overall Yields: The industrial sector shows a recovery with a total return of 3.3% in the first quarter of 2025.
Government Policies
Subsidies and Incentives: Support policies for construction and innovation (e.g., subsidies for data center construction or energy retrofitting) improve the profitability of performing assets.
Regulations: Strengthened environmental standards impose renovations, which can both increase the value of upgraded properties and generate costs for obsolete assets.
Taxation and Regulatory Stability: The Australian tax framework remains attractive to foreign investors, but changes in property taxes or zoning rules can impact medium-term profitability.
Potential Risks
- Economic Fluctuations: Dependence on global economic growth exposes the market to risks related to trade wars, financial market volatility, or decreased external demand.
- Interest Rate Variations: An increase in interest rates reduces the discounted value of future rental flows and can curb investment demand, especially in segments most sensitive to leverage.
- Natural Disasters: Australia being exposed to floods, bushfires, and cyclones, insurance and repair costs can affect profitability, especially in certain regions.
- Tenant Risk: Tenant quality and lease durations are decisive for income stability.
Diversification to Mitigate Risks
Sector Diversification: Combining different asset types (offices, retail, logistics, residential) helps reduce exposure to sector-specific cycles.
Geographic Diversification: Investing in multiple states (e.g., New South Wales, Victoria, Queensland) or in major cities and regions, helps limit the impact of local shocks (example: a slowdown in Melbourne can be offset by growth in Perth or Brisbane).
Recent Statistics and Case Studies
| Key Indicator | Value (2025) |
|---|---|
| Market Size | 75 Bn AUD |
| Annual Growth (CAGR) | 5.3% |
| Prime Office Yield | 4.7% |
| Logistics Yield | 5% |
| Office Rent Growth | 4% (net effective) |
Case Study:
- Scentre Group and Vicinity Centres increased the value of their portfolios by adapting their shopping centers to new uses (multifunctional spaces, digital integration), showing the ability of well-located assets to outperform even during economic volatility.
- Sydney Industrial Market: After a correction, the total return turned positive for two consecutive quarters, illustrating the resilience of the logistics sector facing global economic disruptions.
Summary of Profitability Levers and Risk Management
- Close monitoring of market trends, rental rates, and economic growth.
- Analysis of public policies and anticipation of regulatory changes.
- Systematic diversification across sectors and geographies.
- Rigorous assessment of tenant risk, insurance costs, and sensitivity to interest rates.
Commercial investment in Australia in 2025 combines attractive return potential with a high requirement for risk analysis, the advantage going to diversified, innovative, and well-located portfolios.
Good to Know:
In 2023, rental rates increased by 5% in major Australian cities, influenced by economic growth and favorable government policies, while diversifying investments across sectors and regions remains crucial to mitigate risks related to economic variations and natural disasters.
Decoding Current Sector Trends in Australia
Key Trends in Australian Commercial Real Estate:
Innovative Technologies:
- Commercial buildings are increasingly integrating smart management solutions (sensors, access control, real-time energy monitoring) and infrastructure to support the digital economy (data centers, connected spaces).
- Automation of HVAC systems (heating, ventilation, air conditioning) helps reduce emissions and optimize operating costs.
- “Phygital” (physical + digital) spaces are becoming the norm, offering a hybrid user experience and precise occupancy data to adjust supply in real time.
Sustainable Development and ESG:
- Stricter environmental requirements (green certifications, local materials, green or solar roofs) are now essential to attract investors and tenants.
- Logistics warehouses are massively installing solar panels and reselling electricity, enhancing their appeal to tenants concerned about their carbon footprint.
- Real estate projects now prioritize green spaces, access to natural light, and air quality, meeting the growing demand for workplace well-being.
Demand for Flexible Spaces:
- Short-term leases (6 to 12 months) and fully equipped suites meet the search for flexibility, especially in a post-pandemic context where uncertainty remains high.
- Traditional offices are giving way to modular layouts, collaborative areas, and turnkey solutions to attract SMEs and startups.
- The industrial/logistics segment is also adapting its offering with spaces suited for e-commerce and last-mile logistics, which are in high demand.
Demographic Changes and Public Policies:
- Population growth (notably through immigration) and labor market resilience support demand for commercial real estate, especially in major cities and around university hubs.
- Local authorities are revising urban planning policies to favor the conversion of obsolete assets (offices to residential or mixed-use), to address urban housing shortages.
- Government policies encourage innovation, sustainable construction, and urban renewal, creating an environment conducive to new investments.
Emerging Regions and Investment Opportunities:
| Region | Main Assets | Examples of Recent Opportunities |
|---|---|---|
| Wollongong | Growing infrastructure, quality of life, affordable prices | Investments in logistics hubs and flexible offices |
| Newcastle | Residential migration, industrial development | Deployment of data centers and e-commerce platforms |
| South-East QLD | Demographic dynamism, tourist appeal | Multiplication of mixed-use and logistics projects |
| Sydney/Melbourne Peripheries | City center saturation, search for yield | Development of neighborhood retail, warehouses, BTR |
Concrete Examples and Data:
- The Australian commercial real estate market is estimated at 52.33 billion USD in 2025 and could reach 67.81 billion USD in 2029 with a CAGR of 5.32%.
- Investments in the industrial/logistics sector are expected to grow by nearly 40% in 2025, reaching 10 billion AUD, driven by e-commerce and logistics demand.
- Prime office buildings in Sydney’s CBD show yield rates around 4.5%, while Perth reaches 6.36%.
- The BTR (build-to-rent) segment and student residences are experiencing rapid growth, responding to demographic pressure and increased mobility of urban populations.
Key Points to Remember:
- Technological innovation and sustainable development are no longer options but essential value creation levers.
- The flexibility of spaces and leases is becoming a decisive criterion to attract tenants and investors.
- Emerging regions like Wollongong, Newcastle, and southeast Queensland offer attractive yield prospects, thanks to the combination of infrastructure, demographic growth, and more accessible costs.
- Demographic changes and public policies promote market transformation and diversification, creating new niches and energizing the entire commercial sector.
Good to Know:
Commercial real estate in Australia benefits from the growing adoption of innovative technologies like IoT, facilitating energy management and promoting sustainable development, while demand for flexible workspaces is exploding in emerging regions like the Gold Coast, supported by favorable policies and dynamic demographic growth.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
