The national commercial supply picture for 2025 to 2026

The next two years will be shaped by fragmented supply delivery. Some sectors benefit from stabilising construction inputs, while others face feasibility barriers that restrict new starts. Population growth, infrastructure improvements and lender sentiment continue to shape delivery timelines.

Industrial development remains comparatively active, supported by occupier demand and pre-leasing activity. Retail development remains limited as owners prioritise refurbishments and selective expansion rather than new-build projects. Office supply stays constrained as developers assess feasibility more conservatively.

Office supply pipeline

New office projects remain limited. Many developments paused during the rate rise cycle have not reactivated due to construction costs and changes in tenant preferences. Delivering premium assets is challenging in the current cost environment. Vacancy in prime assets is easing, but incentives remain central to leasing. Limited upcoming supply may help support rental conditions for well-located buildings.

Industrial and logistics supply pipeline

The industrial pipeline continues to dominate national development activity. The 2025 pipeline is forecast at about 27 percent above the 10-year average, driven by large commitments in western Sydney and key logistics corridors. The 2026 and 2027 pipeline has a high proportion of speculative supply, with just over one-third pre-committed.

Developers are responding to chronic land scarcity in infill locations and ongoing demand from users seeking modern facilities. Although incentives have risen, long-term demand fundamentals remain strong.

Retail and mixed-use supply pipeline

Retail supply remains selective, with most activity centred on refurbishment, tenant remixing and small-format expansions rather than full-scale development. New retail projects remain limited, particularly in discretionary formats. Recent analysis indicates that the retail development pipeline for 2024 and 2025 sits at about 21 percent of the 10-year average.

Neighbourhood centres anchored by essential service tenants continue to see consistent enquiry, while mixed-use precincts are progressing in areas where population growth supports integrated retail, residential and service offerings. The restrained pipeline may help support rental stability in well-located centres.

These contrasting pipeline conditions are already influencing tenant behaviour and investor expectations, setting the context for how rents and yields may shift over the next two years.

What the uneven supply means for rents and yields

The supply environment over the next two years will shape rental outcomes differently across sectors. Take note of the following potential developments:

Industrial rents and yields

Incentives have increased across several markets, placing downward pressure on net effective rents. Some forecasts suggest incentives may stabilise during 2026 as demand aligns with supply. Yields are showing early signs of firming as investment interest gradually returns.

Office rents and yields

Prime office rents may experience modest improvement due to limited new supply. Secondary assets continue to face challenges linked to flight to quality and rising capital expenditure. Yield stabilisation is expected to occur selectively and largely according to precinct strength.

Retail rents and yields

Neighbourhood retail assets are seeing solid enquiry levels due to stable tenant profiles and demand for daily needs retailing. Centres with essential service anchors tend to hold pricing better than discretionary formats. Secondary stock with repositioning potential is gaining interest where surrounding population growth is strong.

Key commercial property development trends shaping feasibility

These factors will determine which projects progress and which remain paused over the next two years:

Construction cost movements

Construction costs have stabilised but remain elevated relative to pre-2022 levels. Some commentary points to isolated pockets of renewed pressure where labour shortages persist. Developers are refining feasibility assumptions with closer attention to contingencies and procurement strategies.

Planning delays and policy settings

Approval timelines remain extended in many states. Shifts in land tax, development levies and infrastructure contributions continue to influence project viability. Sector-specific incentives, including build-to-rent settings, vary significantly by state and are shaping where projects advance.

Capital availability

Rate cuts in 2025 have supported sentiment, with lenders showing more interest in sectors with secure income profiles. Developers are facing closer examination around pre-commitments, timing and exit pathways.

How developers can position themselves for the 2025 to 2026 cycle

Developers can strengthen outcomes by focusing on these fundamentals that drive feasibility, demand and delivery:

• Be selective about timing and location — Prioritise corridors with strong population growth and clear infrastructure investment agendas. Emerging nodes with limited existing supply and consistent planning direction continue to gain attention. A commercial property buyers agent can help uncover strategic and off-market opportunities.
• Strengthen feasibility discipline — Review build costs, holding costs and revenue assumptions regularly. Full acquisition costs should be assessed early using tools such as a stamp duty calculator to support feasibility decisions.
• Target sectors where supply is constrained — Industrial infill, neighbourhood retail, childcare and healthcare remain areas of active enquiry. These sectors often provide clearer visibility of tenant needs and may offer stronger pre-commitment potential.
• Explore structured funding and partnerships — Joint ventures, forward funding arrangements and pre-commitment agreements can help reduce risk and support lender confidence.
• Consider land banking where timing is uncertain — In core markets with limited new land release, land banking can help preserve optionality while developers wait for conditions to align.

How developers can move with confidence in the next cycle

Uneven supply pipelines, shifts in demand and the gradual return of capital will shape the next phase of the market. Developers who understand commercial property development trends in Australia and apply disciplined feasibility testing will be positioned to move ahead of competitors.

Costi Cohen supports developers by sourcing high-conviction sites, assessing feasibility and negotiating effectively. The team provides market intelligence, off-market access and coordinated support across due diligence, planning and acquisition. This helps developers move with clarity on timing and confidence in pricing.

In a market where selectivity matters, aligning with the right insights and partners can be the difference between securing a strategic site and missing the window.

Disclaimer: The information in this article is provided for general informational purposes only and does not constitute financial, investment or property advice. Readers should seek independent professional, legal and taxation advice before making investment decisions or acting on yield, duty or return calculations. Market conditions and forecasts may change without notice.