The Australian commercial property market is showing signs of recovery, with experts forecasting a cyclical upswing in 2025.
According to Knight Frank’s Horizon 2025 Report, investors who act now could position themselves for strong returns as the market regains momentum.
“Investors acquiring assets now, after values have adjusted down, but not yet commenced recovery, will be well-placed to see strong returns in years to come,” said the report.
Trends to expect in 2025:
Location matters more than ever
As the market rebounds, location will play a pivotal role in investment success. Understanding these location dynamics will be critical to earning maximum returns.
Core assets in high-demand areas like Sydney’s CBD and South Sydney’s industrial zones are expected to lead the recovery, while other locations may experience slower growth. Knight Frank predicts, as in previous cycles, Sydney’s recovery will ripple outward to other cities, with Brisbane likely next in line to benefit.
Sector-specific growth trajectories
While most commercial property sectors are forecast to grow, some are poised for particularly strong performance:
- Retail: Demand in the retail sector is at its highest since 2015, driven by rising incomes and improving asset performance. With limited supply, capital values are projected to recover, achieving nominal sales growth of 3.0% year-on-year by the end of 2025.
- Build-to-rent: This asset class is expanding rapidly, with up to 6,000 apartments expected to complete nationally in 2025, compared to 4,349 in 2024.
- Data centres: As reliance on digital infrastructure grows, data centres remain a high-growth asset class. Australia’s favourable conditions – such as abundant land, renewable power and competitive costs on a national basis – position it as a potential APAC hub for AI and digital infrastructure.
Why now could be a good time to invest
If you’ve been waiting for the right moment to enter the commercial property market, here are three key reasons why that time might be now:
Positive forward indicators
The listed commercial property market is already showing signs of recovery. After a 25% drop in 2022, the A-REIT price index hit its lowest point in October 2023. However, it has since rebounded strongly, surpassing end-2021 levels.
Historically, improvements in the listed market often signal recovery in the private market, suggesting investor sentiment is shifting positively. This trend could pave the way for broader market participation heading into 2025.
Improved investor sentiment:
After some uncertainty, the appetite for commercial property investment is returning. The retail, office and industrial sectors are all seeing renewed interest.
“The optimal window to acquire assets will extend into 2025 and reflecting this, sentiment has improved markedly through the year across multiple dimensions,” said the report.
Potential interest rate cuts
The Reserve Bank of Australia’s interest rate policies could be another tailwind for commercial property. A potential rate cut in 2025 may boost investor confidence, reduce borrowing costs and increase affordability.
Why work with a professional
Given the complexities of the commercial real estate sector and its current position, it can be helpful to use an experienced buyer’s agent for your transactions. A skilled agent can provide you with insights into market trends, help identify promising investment opportunities and negotiate favourable purchase terms. With a buyer’s agent, you can capitalise on the trends expected for 2025.
As a leading commercial buyer’s agency, Costi Cohen helps investors acquire premium properties in key markets nationwide. Contact us today to find out how we can support your investment goals on [email protected] or 02 8934 3414.
