Commercial Property Market Trends – May 2025

The commercial property landscape in Australia is experiencing significant shifts driven by evolving market demands, investment trends, and urban development strategies. As we move further into 2025, both investors and developers are recalibrating their approaches to maximise opportunities in industrial, retail, and mixed-use sectors. This report outlines the key trends shaping the market, offering insights into the strategies driving growth and resilience.

1. Industrial Sector Resilience

The industrial sector has proven to be one of the most robust segments of the commercial property market. Despite minor fluctuations in vacancy rates, the demand for warehousing and logistics hubs remains strong. With the rise of e-commerce and last-mile delivery, strategic locations close to major transport links are seeing sustained interest from investors and tenants alike.

• Logistics and warehousing facilities are witnessing heightened demand, particularly in Melbourne, Sydney, and Brisbane.

• Investments in last-mile logistics are becoming crucial as e-commerce continues to drive the need for faster delivery times.

• Developers are prioritising strategic locations with proximity to arterial roads and ports to meet supply chain demands.

2. Capital Investment Surges

Investor confidence in the Australian commercial property market is reflected in the surge of capital investments seen in early 2025. The first quarter alone recorded $6.9 billion in commercial real estate transactions, the highest Q1 total since 2022. Large-scale acquisitions across industrial and retail sectors underline a clear appetite for high-yield assets.

• Centuria’s acquisition of a $33 million industrial facility in Melbourne marks its continued expansion in logistics real estate.

• Charter Hall’s $146 million purchase of Geelong’s Corio Village demonstrates confidence in regional retail hubs with strong anchor tenants.

• UAE-based Arada’s $20 million acquisition of Roberts Co NSW highlights growing international interest in Australian commercial properties.

3. Retail Space Shortage Driving Demand

The Australian retail sector is experiencing a tightening of supply, with new retail space delivery for 2024 and 2025 projected to be just 21% of the 10-year average. This scarcity is creating heightened competition for prime locations and pushing rental rates upward.

• Retail vacancy rates are shrinking in key metro areas, increasing competition among retailers for available space.

• High-demand precincts are expected to see above-average rental growth, with long-term leases becoming increasingly valuable.

• Developers are focusing on creating high-quality retail environments that attract both tenants and customers in densely populated areas.

4. Strategic Shifts Towards Mixed-Use Developments

To maximise land usage and address urban density challenges, developers are increasingly turning to mixed-use developments. These projects blend industrial, commercial, and retail spaces into cohesive environments, supporting live-work-play lifestyles.

• Mixed-use projects such as the Sunshine Coast Industrial Park are combining industrial sheds with retail and commercial offerings.

• This approach not only optimises space but also attracts a diverse range of tenants, from logistics firms to service providers.

• Developers are prioritising connectivity, access, and amenities to enhance the appeal of these sites.

5. Green Development and Sustainability Focus

Sustainability is now a cornerstone of commercial property development, driven by both regulatory requirements and investor expectations. Green-certified buildings are becoming increasingly popular, offering reduced operational costs and long-term environmental benefits.

• Developers are prioritising energy-efficient designs, sustainable materials, and green building certifications.

• Investors are favouring assets with strong ESG (Environmental, Social, Governance) credentials, aligning with global sustainability goals.

• Properties with solar installations, rainwater harvesting, and green rooftops are becoming standard in new developments.

6. Outlook for 2025 and Beyond

The trajectory for Australia’s commercial property market remains positive, bolstered by strategic investments in industrial assets and sustainable development projects. Key regions like Melbourne’s west, Sydney’s outer suburbs, and Brisbane’s logistics corridors are expected to lead growth.

• Continued focus on logistics and last-mile delivery solutions.

• Growth in mixed-use developments catering to diverse business needs.

• Strong demand for retail and industrial properties in growth corridors.

Looking to Invest or Develop?

Our team specialises in marketing, branding, and digital visualisation for commercial property projects across Australia. If you’re looking to capitalise on these market trends, connect with us to discuss how we can elevate your next project.