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.”

Luxury in Bellevue Hill has traditionally been measured through land, elevation and harbour outlooks. At Ōtium, a boutique residential development taking shape at 206B Victoria Road, the defining quality is quieter: a sense of separation from the city without leaving Sydney’s eastern suburbs.

Positioned above Cooper Park, the development turns away from the movement of Victoria Road and towards the reserve’s dense green canopy. Its north-western rear orientation has been designed to capture natural light, parkland views and the Sydney skyline beyond.

The result is a collection of residences conceived around privacy, space and a close connection with the surrounding landscape.

Award-winning architecture practice MHN Design Union has designed the building, using its elevated setting to establish a distinctly different outlook from many of Bellevue Hill’s apartment developments. Rather than treating the park as a distant backdrop, the architecture draws it into the residences through broad openings, private terraces and living spaces oriented towards the trees.

The Victoria Road elevation uses brickwork to give the building a grounded, enduring street presence. To the rear, the architecture becomes more open, with the residences extending towards private outdoor areas overlooking Cooper Park.

Inside, Ennen & Co has developed a warm and restrained material palette influenced by the building’s architectural forms and natural setting. Clean lines are offset by stronger moments of colour and texture, including deep green tiling, natural stone, marble and bespoke joinery.

The approach is deliberately understated. Instead of relying on conspicuous finishes, the interiors have been designed as a flexible backdrop for furniture, art and the individual preferences of each owner.

Ōtium comprises just eight homes; a garden residence, six upper-level residences and an expansive penthouse. The garden residence offers the most direct relationship with the landscaping, while the penthouse takes advantage of the development’s elevation with views across the parkland canopy towards the city.

A communal rooftop terrace provides another perspective over Bellevue Hill and Sydney. The space has been planned for quiet morning use as well as private gatherings, giving residents access to an elevated outdoor area beyond their individual terraces.

Construction is being undertaken by Ultra Building Co for developer Concretive. Ultra describes the development as a $16 million project and says its work has focused on natural stone, custom joinery, bespoke tiling, acoustic and thermal performance, and carefully resolved transitions between indoor and outdoor spaces.

The location places residents close to several distinct neighbourhood centres. Bellevue Road Village provides local cafés, shops and daily services, while Plumer Road, Double Bay and Bondi Junction extend the dining, retail and transport options. Cooper Park itself offers walking trails and tennis courts, with Sydney’s eastern beaches and the Royal Sydney Golf Club also within easy reach.

It is a location that allows daily life to remain highly connected while creating a more secluded atmosphere at home.

Ōtium is being marketed by Ray White Double Bay Projects, with agent Daniel Ungar noting the development’s strong appeal among buyers.

“Ōtium has resonated strongly with buyers because it offers a combination that is increasingly difficult to find in Bellevue Hill, generous, house-like proportions, privacy and a genuine connection to nature, without the maintenance of a freestanding home,” Ungar says

Above Cooper Park, Ōtium makes stillness itself part of the proposition, an increasingly valuable quality in one of Sydney’s most tightly held residential markets. It offers the security and lower-maintenance qualities of apartment living, but with larger interiors, private terraces and a natural outlook more commonly associated with a freestanding home.

Project details

Project: Ōtium
Address: 206B Victoria Road, Bellevue Hill, NSW
Developer: Concretive
Architect: MHN Design Union
Interior design: Ennen & Co
Builder: Ultra Building Co
Status: Under construction
Selling agents: Daniel Ungar & Zorick Toltsan | Ray White Double Bay Projects
Contact: 0400 112 202 | 0411 227 784

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.