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.”

Mirvac has topped out Trielle at Melbourne’s Yarra’s Edge, with more than 70 per cent of the riverfront development sold and approximately 80 per cent of purchasers intending to make their apartment a home.

The figures, released on September 22, point to an owner-occupier audience for one of the precinct’s final residential towers. Mirvac began developing Yarra’s Edge in 2003, and its latest addition occupies one of the remaining absolute riverfront sites.

Mirvac CEO of Development Stuart Penklis said existing residents were among those moving up within the neighbourhood.

“Many purchasers already have a connection to Yarra’s Edge,” Mr Penklis said, describing buyers whose changing needs were encouraging an upgrade within the precinct.

“As one of the final residential towers within Yarra’s Edge, Trielle represents the culmination of more than two decades of creating one of Melbourne’s most established and sought-after waterfront communities,” Penklis said.

“Positioned on the Collins Street axis with absolute river frontage, Trielle offers residents a rare opportunity to enjoy sweeping views across the Yarra River, Melbourne skyline and Port Phillip Bay, while remaining seamlessly connected to the CBD. With Trielle now more than 70 per cent sold, we’re continuing to see strong demand from buyers seeking quality homes in established locations.”

The developer also flagged a penthouse and sub-penthouse collection with larger layouts, premium finishes and broad outlooks. The planned wellness centrepiece, The Oasis, encompasses a 900-square-metre elevated urban rainforest.

Mirvac General Manager Residential Development Victoria Elysa Anderson said Trielle had resonated strongly with buyers seeking a rare lifestyle offering in Melbourne.

“Opportunities to secure a new luxury residence on a riverfront site of this calibre are incredibly rare, particularly within a community like Yarra’s Edge,” Anderson said.

“What makes Trielle unique is the combination of exceptional views, world-class residential facilities and the lifestyle that already exists around it. Residents are buying into a mature waterfront community with parks, promenades, dining, wellness and strong community connections already in place.”

The 45-level tower brings a substantial new presence to that waterfront. Its residential offering spans one-, two-, three- and four-bedroom apartments, with Signature, Prestige and Sub-Penthouse collections accommodating different household sizes. The north-facing position connects the apartments visually to the river and city beyond.

Seven storeys above the promenade, the planned Oasis combines planting and a running stream with a Scandinavian-inspired wellness club developed with spa specialist Naomi Gregory. Facilities include a 25-metre lap pool, hot magnesium pool, sauna, hydrotherapy, a gym, yoga and Pilates room, and treatment spaces.

The amenity extends beyond exercise. Residents will have access to The Biblioteca library and workspaces, ground-floor work pods, and The Salone piano lounge. A private Chef’s Table dining room offers a setting for larger gatherings, while a cinema, games room and sports lounge broaden the entertaining options. Concierge services and a dog-wash area support everyday routines.

Trielle comprises a collection of one, two, three and four-bedroom residences. Reflecting strong demand from owner occupiers, approximately 80 per cent of purchasers to date intend to live in their homes, highlighting the project’s appeal to those seeking a long-term waterfront lifestyle.

Mirvac has recently delivered The Albertine, a premium apartment development on the edge of Melbourne’s CBD, and is nearing completion of Prince & Parade in Brunswick, further strengthening its portfolio of thoughtfully designed apartment communities in some of Melbourne’s most sought-after urban locations.

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.

Mirvac’s 45-level Trielle has topped out at Yarra’s Edge, pairing riverfront apartments with wellness facilities, private dining and resident services.