The Australian commercial property market, valued at AUD 34.11 billion in 2024, is positioned for substantial growth in the coming decade. With its potential for long-term, stable rental income and its significant impact on local economies, the market is attracting increased interest from investors, businesses, and developers. The commercial real estate sector, encompassing office buildings, retail spaces, industrial properties, and mixed-use developments, is projected to experience a robust compound annual growth rate (CAGR) of 8.60% from 2025 to 2034. By 2034, the market is expected to reach an impressive AUD 77.84 billion.
As Australia continues to grow as a global business hub, the commercial property market is being driven by demand from diverse industries, population growth, and urbanization. Investors are drawn to commercial properties for their long-term returns, stable rental income, and the potential for property value appreciation. Additionally, the commercial real estate sector plays a pivotal role in job creation, economic growth, and the development of vibrant communities.
Key Drivers of Growth in the Australian Commercial Property Market
1. Long-Term Lease Agreements and Stable Income
One of the most attractive features of commercial properties is the long-term lease agreements they often involve. Unlike residential properties, which may experience more frequent tenant turnover, commercial properties typically have longer lease terms ranging from five to ten years. This stability offers business owners and investors reliable and predictable rental income.
For property owners, long-term leases with established businesses offer financial security, making commercial properties an appealing investment. Additionally, these long-term leases tend to be indexed to inflation, ensuring that rental income grows over time and helps offset rising operating costs.
2. Economic Impact and Job Creation
The commercial property sector has a significant impact on local economies. Commercial buildings create job opportunities during the construction phase and in their subsequent operation. These include construction jobs, maintenance roles, administrative positions, and jobs related to the businesses that occupy these spaces, such as retail and office workers.
Moreover, the presence of high-quality commercial properties can lead to the creation of additional services and businesses in surrounding areas, further boosting the local economy. Shopping centers, office buildings, and industrial complexes often stimulate local business activity by attracting consumers, service providers, and suppliers.
3. Business Expansion and Infrastructure Development
Australia’s growing urbanization and business expansion contribute to the demand for commercial properties. As Australian cities continue to grow and evolve, there is an increasing need for office space, retail outlets, and industrial facilities. Major metropolitan areas such as Sydney, Melbourne, and Brisbane are seeing a surge in business development, driving demand for commercial properties.
Simultaneously, government-backed infrastructure projects and investments are supporting the development of new commercial spaces. Increased connectivity, improved transportation, and the development of business hubs or economic zones make commercial properties in these areas more attractive to investors and businesses looking for strategic locations.
4. Attractive Investment Opportunities and Strong Returns
Investors seeking long-term returns are increasingly turning to commercial real estate. The potential for capital appreciation, coupled with the ability to generate stable rental income, makes commercial properties a solid investment option. The Australian market is considered to be relatively stable, offering attractive returns for both local and international investors.
Commercial properties also present opportunities for diversification within investment portfolios, as they tend to be less volatile compared to residential property markets. Additionally, the high demand for prime commercial real estate in Australia's key cities ensures a competitive market that offers lucrative opportunities for experienced investors.
5. Strong Demand from International Investors
Australia has long been an attractive destination for international investors, and the commercial property market is no exception. The stable economy, political stability, favorable exchange rates, and strong real estate fundamentals make Australia a prime market for foreign capital. International investors are increasingly seeking to invest in commercial properties, particularly in major cities where demand for office, retail, and industrial spaces is consistently high.
The Australian government’s investment-friendly policies and transparent real estate market also provide confidence to foreign investors, who view the commercial property sector as a secure investment option with the potential for strong returns.
Market Forecast and Projections
The Australian commercial property market is poised for sustained growth, with an anticipated CAGR of 8.60% from 2025 to 2034. By 2034, the market is expected to reach AUD 77.84 billion, driven by increasing demand across all commercial real estate segments. Below, we explore key segments and their projected growth:
1. Office Properties
Office buildings are a cornerstone of the commercial property market in Australia, serving as business hubs for companies across industries. Despite shifts in work trends such as remote and hybrid models, demand for office space remains robust, especially in central business districts (CBDs) and prime locations. Businesses still need flexible office spaces for collaboration, meetings, and networking, and these spaces continue to be seen as essential for creating a strong company culture and brand presence.
The demand for high-quality office buildings with modern amenities, green certifications, and flexible leasing options is driving the office property market. Additionally, businesses are increasingly looking for spaces that integrate technology, sustainability, and wellness features, further expanding the range of commercial office property offerings.
2. Retail Properties
Retail properties, such as shopping centers, malls, and high-street retail spaces, have faced challenges due to the rise of e-commerce and changing consumer shopping habits. However, there remains strong demand for prime retail locations in major cities, especially those with high foot traffic and a diverse mix of tenants. The recovery of in-person shopping after the pandemic has boosted the retail sector, and new retail formats such as experiential spaces, pop-up shops, and integrated digital experiences are driving innovation in this segment.
Retail property owners are focusing on creating dynamic, consumer-focused spaces that combine shopping, dining, and entertainment, catering to modern consumer preferences. The resilience of the retail sector, coupled with the ongoing demand for prime retail spaces, ensures a steady flow of investments in this area.
3. Industrial Properties
Australia’s industrial real estate sector has seen significant growth, fueled by the expansion of e-commerce, logistics, and warehousing. As online shopping continues to surge, demand for distribution centers, fulfillment hubs, and warehouses is increasing. The rise of global supply chains, as well as the shift toward localized production and storage, has made industrial properties one of the most sought-after segments in commercial real estate.
Additionally, advancements in technology, including automation and artificial intelligence, are shaping the future of industrial properties. Developers are increasingly focusing on building high-tech, efficient warehouses that cater to modern logistics and supply chain needs.
4. Mixed-Use Developments
Mixed-use developments, which combine residential, retail, office, and entertainment spaces in a single location, are becoming more popular in Australia’s major cities. These developments offer businesses the advantage of being in vibrant, multi-functional areas with a mix of customers, making them attractive to both investors and end-users. As urban areas continue to expand and develop, mixed-use properties are an efficient way to meet the demand for space in key locations.
Challenges and Opportunities
While the commercial property market in Australia presents substantial growth opportunities, it also faces certain challenges. Rising construction costs, regulatory changes, and the impact of economic fluctuations on demand for space may pose obstacles to market growth. However, these challenges also present opportunities for innovation, such as the development of sustainable and energy-efficient properties, adaptive reuse of buildings, and the introduction of flexible leasing options to meet changing market demands.
