Commercial Property Market Set to Rebound Through 2026
Knight Frank’s latest Horizon 2025 update signals renewed confidence in Australian commercial real estate, with signs of recovery accelerating across cities and sectors.
Knight Frank’s latest Horizon 2025 update signals renewed confidence in Australian commercial real estate, with signs of recovery accelerating across cities and sectors.
The recovery of Australia’s commercial property sector is expected to gather pace throughout 2025 and into 2026, according to new research released by Knight Frank.
The update to the firm’s Horizon 2025 outlook finds that the sector is “sequentially turning the corner back to growth,” with fundamentals for long-term expansion firmly in place.
While global risks, such as the impact of US-imposed tariffs, still linger, the report notes the worst may be behind the market.
Knight Frank Chief Economist Ben Burston said: “In this respect, property is better placed than other asset classes to withstand the trade war,” adding that volatility in equity and fixed income markets has made property a more attractive option once again.
Following a period of disruption, retail and industrial asset values were the first to recover, with all segments and cities returning to growth by late 2024.
“Office values have also now turned positive in Q1, off the back of improving prospects for core CBD assets despite pockets of over-supply elsewhere,” Burston said.
The report also points to increasing liquidity, with large-scale acquisitions becoming more common and investor confidence returning amid expectations of further interest rate cuts.
“Property markets will respond to the rate-cutting cycle, and the shift in the outlook raises the prospect of yield compression in the second half of the year, starting in the most favoured core markets,” said Burston.
Industrial and logistics assets are leading the charge, with competition intensifying for prime properties in Brisbane and Sydney.
Meanwhile, the living sectors continue to gain ground, with nearly 16,000 new student accommodation and build-to-rent units under construction and more than 20,000 approved for future development.
With asset values now well below replacement cost and market rents lagging, Knight Frank reports a growing pool of investors positioning themselves in core markets to take advantage of cyclical recovery and medium-term rental growth.
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