What’s driving Australia’s commercial property market in 2026?

Commercial property insights at a glance

Commercial property investment activity remains active across sectors, despite a dip in overall volumes from a year ago
Private investors are among the most active buyer groups, while offshore buyer activity has declined
Retail property is attracting strong demand, with renewed interest in the office sector
Higher interest rates and geopolitical uncertainty are influencing buying decisions and investor sentiment
Regional Australia is showing stronger momentum than metropolitan markets, supported by population growth and higher yields

Commercial property market remains active

Australia’s commercial property market continues to show resilience in 2026, with transactions occurring across a broad range of sectors, price points and locations. There is also a steady flow of new properties coming to market, supporting ongoing activity levels despite a more cautious investment environment.

Indications in Q2 so far point to further strengthening in commercial property sales activity, suggesting underlying demand as 2026 progresses. This builds on total commercial property sales for the 12 months to Q1 of $73 billion, representing a 22% increase on a rolling annual basis.*

Higher interest rates have altered the economics for many buyers, while ongoing geopolitical uncertainty, including the conflict in the Middle East, has led some investors to adopt a more cautious approach. This has led to some, particularly offshore institutions, adopting a wait-and-see stance before committing to new acquisitions.

Even so, as we have seen in the current quarter, activity levels remain relatively healthy given broader economic conditions, with buyers continuing to transact where long-term fundamentals remain attractive.

Private buyers and institutions lead activity

Direct local private buyers were the largest purchasing group in Q1 2026, accounting for 36% of all acquisitions. These investors remain active across a range of commercial property assets, supported by opportunities to secure long-term income streams and achieve diversified investment exposure.

Domestic institutional investors also increased their activity in early 2026, accounting for 33% of all trading. These investors are increasingly looking beyond short-term uncertainty and focusing on the long-term role commercial property can play within diversified portfolios.

By comparison, offshore buyer activity has moderated. Offshore investors accounted for 19% of total trading in Q1 2026, down from 31% in 2025.

Retail and office sectors attract renewed interest

In Q1 2026, retail was the most actively traded commercial property sector, recording $5.8 billion in sales across almost 400 transactions. During the first quarter of this year, the sector continued to benefit from resilient household spending, low vacancy rates and limited new supply.

Investor interest is also returning to the office market. Office property recorded $5.3 billion in turnover during Q1 2026, making it the second most active sector for the quarter. Vacancy rates in many Australian office markets are now believed to have peaked, while the pipeline of new supply is beginning to slow.

The office sector also currently offers some of the highest yields across commercial property asset classes, creating a more attractive spread relative to the increased cost of funding.

Industrial property has been the most heavily traded sector since 2020, but its turnover was down to $4.1 billion in Q1 2026. Rental growth, which has been a major driver of industrial property values in recent years, is now easing back towards longer-term averages. As a result, expectations for future value growth have moderated, reducing investor demand and activity.

Higher interest rates shaping investor decisions

Higher interest rates continue to influence commercial property investment decisions across the market. Increased borrowing costs naturally reduce the feasibility of acquisitions for some buyers, slowing overall transaction volumes.

There is also consideration around the broader economic outlook. If higher interest rates lead to slower economic growth or weaker demand for commercial space, asset values could come under pressure. Some investors may therefore be delaying acquisitions in anticipation of potentially lower pricing opportunities in future periods.

Despite these challenges, long-term investors continue to identify opportunities in sectors and locations where underlying fundamentals remain strong.

Regional markets gaining momentum

While overall transaction activity across Australia has softened in early 2026, regional markets are showing stronger momentum than metropolitan areas. In Q1 2026, commercial property sales in Regional Australia reached $3.4 billion, up 59% on the same time a year earlier.

This trend reflects broader population growth patterns across regional Australia, with more people increasingly viewing regional locations as an attractive alternative to metropolitan living. Ongoing interstate and overseas migration is supporting demand growth across many regional centres.

Regional commercial property also continues to offer higher yields compared with metropolitan markets. In a higher interest rate environment, these stronger yields can improve acquisition feasibility and support investor demand.

As a result, regional Australia is emerging as an area of increasing focus for investors seeking both income opportunities and long-term growth potential.

Talk to CommBank

As commercial property investment activity and lending conditions continue to evolve, clients may be seeking guidance from brokers on funding strategies and investment opportunities.

Speak to your CommBank Business Development Executive about the opportunities available in commercial property lending to support your client’s commercial property goals.