Lower Rates, Consumer Confidence at a 3-Year High and Return-To-Work, Drive Commercial Property Market Higher

Leading property group Raine & Horne has just published its latest Commercial Insights report, providing a window into the state of the commercial property market around Australia.

The report identifies four main factors impacting the commercial property market:

Rate cuts are driving consumer confidence

A string of rate cuts through 2025 has marked a noteworthy shift in buyer sentiment – raising borrowing capacities, reducing borrowing costs, and allowing more buyers to invest in commercial property.

Mr Chris Nicholl, CEO of Raine & Horne Group, says, “The rise in sentiment – and disposable income – resulting from rate cuts is welcome news for the nation’s business sector, and this in turn, will filter through to the commercial property market.

“A less obvious side effect of rate cuts is that we are seeing a growing number of investors turn to commercial property seeking high yields and regular income.

“This is increasing competition among buyers, and in key areas such as Sydney’s Inner West, Raine & Horne property experts report that buyer enquiries, especially for industrial property, are at the highest level ever seen.”

Industrial property – a persistent undersupply

Industrial property continues to be the standout performer in Australia’s commercial property market, supported by the ongoing growth of e-commerce. However, the emerging undersupply of land devoted to industrial estates is pushing the price of industrial assets higher and intensifying competition among tenants and buyers.

Across a number of major centres, including Canberra, Adelaide, and Hobart, vacancy rates for industrial property remain close to zero. This continues to drive up values in this asset class,” said Mr Nicholl.

Weaker inflation is shoring up demand for industrial and retail assets

As the cost-of-living crunch subsides, the commercial property sector is set to benefit from increased retail spending, both in online and bricks-and-mortar outlets. This will support demand for industrial properties used for warehousing and logistics, as well as retail assets.

Post-COVID return to formal workplaces drives office market

Demand for office properties is increasing as employees return to formal workplaces. This is pushing vacancy rates down across the office market in a number of urban centres, particularly Sutherland Shire, Liverpool and Hobart.

Mr Nicholl noted, “Raine & Horne commercial property experts are seeing office tenants increasingly seeking quality properties with plenty of employee amenities to entice staff back to formal workplaces. This is driving many commercial landlords to invest in renovations or upgrade older stock in order to compete with more modern assets.”

Additional factors driving the commercial property market 

As has been observed in past editions of Commercial Insights, infrastructure developments can be a key driver of commercial markets at a local level.

Mr Nicholl said, “In the Hunter Valley, we are seeing the commercial property market benefit from the completion of the Hexham Straight project, which will ensure reliable travel times for freight along the Pacific Highway.

“The Wagga Wagga market is benefitting from a multitude of infrastructure projects, including the Riverina Intermodal Freight and Logistics Hub.

“The upcoming 2032 Brisbane Olympics, coupled with major infrastructure projects such as the Cross River Rail, are creating new commercial property ‘hot spots’ in the city, especially those areas within 10 kilometres of the CBD,” added Mr Nicholl.

A wealth of opportunity 

For owners of commercial property, the current market environment provides an ideal opportunity to sell assets and release capital gains for other projects.

For owner-occupiers and investors, rate cuts have increased borrowing capacities, providing opportunities to enter the commercial market before values rise further.

“I encourage commercial property owners, as well as anyone considering buying commercial assets, to read Raine & Horne’s Commercial Insights report to discover details of recent sales results across the nation.

It’s a simple way to understand prices, yields and the market supply/demand dynamics in your area,” concluded Mr Nicholl.