Australia’s commercial property market turns the corner

After a year of recalibration, Australia’s commercial property markets enter 2026 with renewed confidence and showing recovery signals. 

The second half of 2025 marked a turning point: multiple rate cuts restored liquidity, transaction volumes surged, and investor sentiment shifted decisively. Industrial assets, one of the sector’s most resilient performers, continued to dominate the conversation.

Foreign capital has been a major driver of this resurgence, injecting $7.4 billion into Australian commercial property this year; with $2.9 billion flowing into industrial assets alone.

Queensland emerged as a standout beneficiary, capturing roughly 20% of these inflows, while Victoria’s share declined under the weight of rising taxes and holding costs. 

Renewed global interest underscores Australia’s reputation as a safe haven - a theme looking set to continue into 2026.

Pricing trends tell a similar story

In our 2024 article “The Time for Industrial Property is NOW”, we argued that the interest‑rate cycle was nearing its peak and that cap‑rates would begin to compress as rate cuts restored risk appetite. That is precisely what played out in 2025. 

Prime industrial yields, which peaked mid-year, have begun to compress, averaging around 5.7% nationally. Sydney and Brisbane are leading this recovery, while Melbourne remains subdued amid policy headwinds.

Vacancy rates, while drifting upwards, remain below equilibrium and among the lowest rates in the world - patterns KPMG highlighted in its H1 2025 market update.

In 2024, we noted that surging construction costs would lift the asset replacement values, moderating speculative supply and supporting rents. In 2025, the pattern persisted. Most markets recorded 4–6% annual escalation, with pressure skewed to labour and key inputs.

The net effect in 2025 was an active but rationalised pipeline - more pre-commitments, fewer speculative starts, and some completions slipping into 2026 - exactly the setting that protects existing income streams and supports pricing.

Brisbane, in particular, has been a standout performer. Leasing demand across logistics and manufacturing corridors remains robust, even as speculative completions have nudged vacancy higher from historically tight levels. 

Prime yields and land values have held firm, supported by infrastructure connectivity and infill scarcity - factors that position Brisbane as a market to watch in the year ahead.

E‑commerce remains a structural demand engine

In our 2024 paper, we stated that the e‑commerce boom would continue to drive warehouse, parcel‑hub and fulfilment capacity, particularly in infill markets with constrained land supply. 

The 2025 evidence is persuasive: e‑commerce sales have now reached the pandemic high of 14% of total retail sales; and is forecast to rise to ~17% by 2029, requiring ~1.7–1.8 million m² of additional logistics space over the next five years. 

Australia Post’s national data corroborates the scale and resilience of online spend- $69bn online in 2024, with households purchasing more frequently across daily‑needs categories .

For industrial landlords, this has two practical implications we highlighted in 2024: 

1. Sustained tenant demand in core corridors close to population centres; and
2. The operational premium for modern, tech‑enabled assets. 

2025 leasing data shows transport & logistics and retail trade tenants remained top contributors to take‑up, consistent with this thesis. Incidentally, we have also noted tenant enquiry around click and collect bays in our essential retail portfolio.

We’ve long recognised the strong alignment between current macroeconomic themes and positive prospects for the industrial sector. 

Opportunity in essential retail

Over the past two years, however, essential retail has also captured our attention - and these assets are now quietly regaining momentum. Anchored by daily-needs tenants, these centres have benefited from population growth and resilient consumer spending, offering diversification and stability in a shifting market. 

As more retail activity moves online, large enclosed malls - costly to operate and increasingly less relevant - face headwinds, while the convenience of accessible local strip centres becomes more appealing for everyday needs.

Our own activity in 2025 reflects confidence in current fundamentals. We acquired two assets for our Trilogy Industrial Property Trust and launched the Trilogy Essential Retail Fund, completing a successful capital raise for its seed asset. 

These initiatives demonstrate our commitment to segments that we believe will remain central to Australia’s commercial property landscape.

As 2026 approaches, the signals point to a commercial property market that is evolving. While risks persist - policy costs and global volatility to name a few – the sector’s fundamentals suggest a year of opportunity for those focused on quality, resilience, and strategic location.

Managed Fund

Trilogy Industrial Property Trust

Australian Property

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Managed Fund

Trilogy Monthly Income Trust

Alternative Assets

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