Australia’s commercial real estate market is capturing global attention.
According to the latest CBRE data, foreign investment surged by 37% in 2024 to $8.3 billion. U.S. investors dominated, contributing $3.6 billion - more than double the previous year. Japan also maintained a strong presence, investing $1.9 billion, while Singaporean investors poured around $1 billion into the market.
Several key factors are boosting Australia’s growing international appeal, including:
- Economic Stability: Robust GDP, low unemployment, and a transparent legal framework continue to position Australia as a safe haven for international capital.
- Demographic Growth: Rapid population growth and urbanisation are supporting demand.
- Value: Discounted asset prices, particularly in the office sector, present significant opportunities.
- Sector-Specific Demand: The industrial, retail, and build-to-rent (BTR) sectors are being fuelled by the e-commerce boom and ongoing housing shortages.
The report predicts continued strong foreign investor interest in 2025, with volumes forecast to increase by 15%.
Tapping Into Value-Driven Opportunities
The office market experienced a 56% year-on-year growth in investment volume, reaching $8.4 billion in transactions.
Investors are gravitating toward the sector, attracted by significant opportunities, with some properties trading at up to 30% below replacement cost.
The report forecasts that office vacancy rates will tighten further to 0.7% per annum by 2028.
Strong net effective rent growth in Sydney and Brisbane, coupled with improving CBD visitation, positions the office sector for strong long-term capital appreciation.
Retail Resilience Fuels Interest
Retail emerged as the second most active sector, reaching $7.3 billion in transactions – a 34% increase from 2023.
Strong retail sales, vacancy rates under 5%, and limited new supply continue to create favourable conditions for investors.
The report predicts 75% of new retail space over the next three years will be in Large Format Retail and Neighbourhood Centres in high-growth population corridors.
“Retail sales have grown by over 50% during the past decade,” said Kate Bailey, Head of Retail Research at CBRE. “Coupled with challenges in bringing on new supply, we’re constructive on rent growth outlook.”
Unlocking Growth Potential In Living
The living sector continued its steady growth trajectory, with $4.8 billion in transactions recorded in 2024, a 6% increase from the previous year.
Supply shortfalls and investments in student accommodation and build-to-rent projects are driving activity, supported by strong population growth and housing demand.
Vacancy rates in capital cities are expected to continue their downward trend, with CBRE forecasting a drop from 1.9% in 2024 to 1.2% by 2029. At the same time, rents are projected to rise by over 25% in the next five years, with new builds commanding a 20%-30% premium over older properties.
Core Industrial and Logistics Assets Continue to Lead
Demand for high-quality industrial and logistics assets remains robust, with the sector recording a 14% year-on-year growth to $7.1 billion in transactions in 2024.
Net face rent growth in 2025 is forecast at 4.0% across Australia, with select precincts outperforming.
“A ‘flight to quality’ trend, like the office market, is evident, with continued demand for good quality assets in core locations, as well as for infill/last-mile locations,” said Sass Jalili, Head of Industrial and Logistics Research.
Looking ahead, strategic partnerships, particularly related to land acquisitions for Data Centres, are set to shape the future of the sector.
