Australian commercial property shows strong recovery.

Trilogy Funds' Laurence Parisi said the second half of 2025 marked a turning point for the sector with multiple interest rate cuts restoring liquidity and driving a surge in transaction volumes. "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," Mr Parisi said. "Queensland emerged as a standout beneficiary, capturing roughly 20 per cent of these inflows, while Victoria's share declined under the weight of rising taxes and holding costs."

Mr Parisi said the renewed global interest underscores Australia's reputation as a safe haven for investment, a theme that looks set to continue into 2026.

Industrial sector leads the recovery

According to Mr Parisi, industrial assets have been among the sector's most resilient performers and continue to dominate the conversation. "Prime industrial yields, which peaked mid-year, have begun to compress, averaging around 5.7 per cent nationally," he said. "Sydney and Brisbane are leading this recovery, while Melbourne remains subdued amid policy headwinds." He said that vacancy rates, while drifting upwards, remain below equilibrium and among the lowest rates in the world.

"In 2025, we've seen surging construction costs lift asset replacement values, moderating speculative supply and supporting rents," Mr Parisi said. "Most markets recorded 4-6 per cent annual escalation, with pressure skewed to labour and key inputs."

E-commerce driving demand

Mr Parisi highlighted that e-commerce continues to be a structural demand engine for industrial property.

"E-commerce sales have now reached the pandemic high of 14 per cent of total retail sales and are forecast to rise to approximately 17 per cent by 2029," he said. "This growth will require about 1.7-1.8 million square metres of additional logistics space over the next five years." He said transport and logistics and retail trade tenants remained top contributors to take-up, consistent with this trend.

Looking ahead to 2026, Mr Parisi said the signals point to a commercial property market that is evolving positively. "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," he said.