Why Commercial Property Isn't Following the Residential Market

For months, Australia’s property conversation has centred on falling house prices, higher interest rates and the impact of the Federal Budget on investors.

But according to Melbourne buyers’ advocate Abdullah Nouh, many investors expecting commercial property to follow the same path are overlooking what’s actually happening across the market.

“The biggest mistake investors are making is treating commercial property as one market that moves in one direction at one time,” Nouh says.

“Office towers, neighbourhood medical centres, industrial warehouses and childcare centres all respond to completely different supply and demand dynamics.”

Rather than experiencing a broad downturn, he says that parts of the commercial market continue to perform strongly, particularly sectors supported by essential services and with limited new supply.

Neighbourhood retail centres anchored by supermarkets and medical services have proven more resilient than many expected, while industrial property continues to benefit from tight supply in most major cities.

Medical centres, childcare assets and other essential service properties are also attracting sustained tenant demand despite higher borrowing costs.

Office markets, however, are telling a different story.

Premium buildings in well-connected locations are beginning to stabilise, Nouh says, while secondary office stock in oversupplied precincts continues to face pressure.

“This isn’t a story about commercial property going up or going down,” he says.

“It’s a story about asset selection mattering more than the headlines.”

The changing market is also altering the questions investors are asking.

Rather than focusing solely on buying another residential investment property, Nouh says more investors are now looking for higher rental income and improved cash flow.

“Instead of asking how to buy another investment property, investors are increasingly asking how they can generate more income from their portfolio,” he says.

He believes commercial property has become part of that conversation because it can deliver stronger rental returns while still offering long-term capital growth when quality assets are selected carefully.

However, Nouh warns investors against assuming every commercial property represents a sound investment simply because it offers a higher yield.

“I’ve seen commercial properties remain vacant for years because they’re in locations with weak business activity,” he says.

“A high yield isn’t necessarily evidence of a good investment. Sometimes it’s evidence of the opposite.”

Instead, he says investors should focus on the same fundamentals that have always underpinned successful commercial acquisitions, including tenant demand, constrained future supply, location quality and whether another tenant would readily occupy the property if the existing lease expired.

“The lease and the tenant both matter,” Nouh says.

“But neither replaces buying a quality asset in a quality location.”

As investors continue to assess the outlook for property following this year’s Budget changes, Nouh believes the biggest opportunity may lie in recognising that commercial property is not a single market.

“Property has never moved as one market,” he says.

“The better question isn’t whether commercial property will fall in the short term. It’s which assets are likely to be in greater demand over the next decade, and whether today’s market creates an opportunity that looks obvious in hindsight.”

The Sydney developer-builder, which typically retains its projects, is offering 54 residences off the plan on Spencer Street, with prices starting at $3.9 million.

HSN Property Group has launched Maison Jolene in Rose Bay, giving buyers a rare opportunity to purchase off the plan from a developer-builder that has spent more than two decades building a predominantly build-to-hold portfolio in Sydney’s eastern suburbs. HSN values that portfolio at $4 billion.

Located at 2–16 Spencer Street, Maison Jolene comprises 54 residences, including house-sized two- and three-bedroom apartments, sub-penthouses and penthouses. Prices start at $3.9 million, according to HSN, with many residences designed to capture views across Rose Bay, Sydney Harbour and the city skyline.

James Nixon, head of projects at The Rubinstein Group, is handling the sales campaign alongside agency founder Gavin Rubinstein. He says the launch is an unusual opportunity for buyers who have followed the developer’s work.

“HSN is renowned for building entire projects and rarely selling a single apartment to the open market, so Maison Jolene really is a first for potential buyers who have been following the brand across previous projects,” Nixon says.

HSN worked with architecture practice MHN Design Union and interiors studio The Unlisted Collective on the development. A rhythm of arches and deep-set openings gives the building its presence on Spencer Street, while the residences are positioned to make the most of natural light, privacy and outlook. Landscaping frames the arrival and carries through to the shared outdoor spaces.

“Maison Jolene was conceived to bring a touch of European elegance to Rose Bay, drawing on the understated charm of Mayfair and the romance of Paris while remaining grounded in the relaxed character of Sydney’s eastern suburbs,” says Rafi Assouline, founder and director of HSN Property Group.

The apartments were designed with established Rose Bay downsizers in mind. Large kitchens, generous storage and flexible living areas are intended to ease the move from a family home, with layouts that can also accommodate families and professionals looking for more space in an apartment.

The shared amenities are designed as an extension of those homes. Residents will have access to a lounge, private dining room and landscaped alfresco entertaining area. A wellness retreat brings together a magnesium pool, cold plunge, sauna, steam room and heated stone recovery bench, alongside a gym and dedicated space for Pilates and yoga.

Inside the apartments, the curves of the façade recur in the cabinetry and balustrades. Custom wall sconces, tapware and patterned parquetry sit alongside carved marble basins, hammered-glass shower screens and recessed stone niches. Timber veneer wardrobes have leather-clad drawers, while an Art Deco-inspired motif appears in the raised ceiling detail, joinery and built-in velvet bedheads.

“Maison Jolene is at once contemporary and old world, with custom-designed parquetry flooring and an art deco-inspired motif juxtaposing with the curvature of the arched facade, balustrade and internal cabinetry,” Assouline says.

The kitchens bring several of those ideas together in a sculptural, bubble-shaped island. Assouline helped design and engineer the curved form and personally selected the marble, which is bookmatched so the veining mirrors across adjoining pieces.

“With each of our projects, I look for symmetry in design,” he says. “Crafting the apartments is like solving a puzzle of one thousand pieces; one little detail wrong could mean the picture doesn’t translate correctly once it’s finished.”

HSN will develop and build Maison Jolene, overseeing the project from design through to construction. The family-owned company says it has delivered more than 270 homes, has 200 apartments under construction and has a 100 per cent completion record.

“As a private, integrated developer-builder, we maintain close control over every stage of a project,” Assouline says. “We see our projects as collaborative partnerships with our architects, interior designers and specialist trades with whom we have refined a very unique aesthetic, to ensure every detail is considered for those who will live there.”

For Nixon, the developer’s involvement in both design and construction is part of the pitch to buyers. “The attention to design excellence, combined with HSN’s proven track record in delivering ultra-high-end developments, ensures a level of rarity and enduring quality seldom seen in today’s market,” he says.

“To purchase an HSN property is to acquire a property that will not just hold its value but stand the test of time as a timeless piece of Sydney real estate.”

The Spencer Street address puts residents close to Rose Bay’s village cafés and restaurants, foreshore walks and ferry service, with beaches, golf courses and schools nearby. Maison Jolene is now selling off the plan through James Nixon and Gavin Rubinstein.

Why Commercial Property Isn’t Following the Residential Market

While many investors are waiting for commercial property prices to fall alongside the residential market, buyers’ advocate Abdullah Nouh says they’re looking at the wrong data, with demand strengthening across several commercial sectors.