Raine & Horne’s latest Commercial Insights report confirms the strength of commercial property as an outstanding long term asset for both investors and owner occupiers.

• Industrial property is the market’s top performer, buoyed by a shortage of new industrial estates, and significant government investment in infrastructure.
• The office market continues to rebound as workers steadily return to formal workplace settings, however tenants are increasingly seeking modern properties offering plenty of amenities.
• The retail property market is enjoying a resurgence, especially across neighbourhood centres with non-discretionary outlets.
• Commercial property continues to deliver attractive yields coupled with solid cash flows. By contrast, the Reserve Bank of Australia observed in its February rate meeting that “Australian equity prices underperformed other markets over preceding months” [1].

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

The report identifies the key factors impacting today’s commercial property market, including:

1. Investors are factoring in higher rates

To date, the 0.25% February rate hike has had only limited impact on the commercial property market reflecting expectations of a higher cash rate since August 2025[2]. 

That said, investors are starting to factor higher borrowing costs into price negotiations. This calls for sellers to take a realistic approach when it comes to asset pricing. 

Angus Raine, Chairman of Raine & Horne Group, said, “In a short timeframe, we have moved from expectations of rate cuts to a rate hike. Higher borrowing costs are, understandably, playing a role shaping buying decisions.

“In particular, investors are focusing on sustainable yields, and realistic asset pricing. This is definitely a shout-out to vendors to meet the market.” 

2. A growing preference for income stability

The high levels of volatility seen on the Australian share market in 2025, have enhanced the appeal of commercial property, backed by its track record for delivering stable and sustainable income through long, and often cost-effective, lease arrangements.

“We continue to see commercial property deliver attractive yields coupled with solid cash flows, which make this asset class attractive to investors,” said Mr Raine.

3. Low supply backed by high demand

In recent years, surging growth in residential property prices has seen a number of substantial commercial property assets converted to residential housing.

Coupled with an already acute undersupply of land devoted to new industrial estates, this is driving the price of industrial assets higher especially in areas close to CBDs, transport links and infrastructure hubs.

There is little evidence that this will change any time soon.

Sydney’s Inner West is a prime example of high demand meeting low supply, particularly across industrial assets.

Mr Raine said, “The completion of the metro rail line through the Inner West is making the area particularly attractive for commercial property as it offers exceptional transport links, and a nearby supply of workers.

“The catch is that demand vastly outweighs supply. This is reflected in strong sales results and rapid sale times, with Raine & Horne commercial property experts reporting a backlog of cashed up buyers waiting for a suitable property to become available.”

4. Household spending remains robust

Despite a cost of living crunch, data from the Australian Bureau of Statistics indicates that household spending remains strong – rising 5.0% in 2025 relative to 2024[3].

Backed by an unemployment rate of just 4.1%[4], this is a positive driver for commercial real estate with many businesses ultimately relying on consumer spending for revenue growth.

“The commercial property market relies on a robust economy, and we are seeing consumer spending undeterred by a cost of living squeeze,” said Chris Nicholl, CEO of Raine & Horne. 

“The retail property market continues to benefit from healthy spending, particularly across small neighbourhood centres that focus on discretionary spending.” 

5. Return to work mandates drive a 2-speed office market

High household spending levels are also being fueled by a tight labour market. However, as businesses encourage employees to return to formal workplaces, many are recognising the value of providing modern, attractive work places that offer both staff amenity and the cost savings of eco-sustainability.

“We are seeing a 2-speed market emerge in the office sector,” said Mr Nicholl. “Assets that are new or recently renovated are leasing far more quickly than B-grade assets. Owners of old office properties need to be aware that without a significant investment in their assets they could face longer vacancy periods.

"In Sydney's CBD, for example, owners who are prepared to upgrade assets by investing in improved facilities and flexible fit-outs, can significantly enhance the tenant appeal of their property. Similarly, assets with strong eco-credentials can deliver reduced costs for both tenants and landlords. This is important as tenants typically want to see their leased assets work harder to attract and retain staff as well as contribute to cost reductions."

Opportunities for portfolio diversification

Investors can take advantage of the current market to negotiate on sale prices, and diversify their portfolios through commercial property. This can be an appealing strategy for self-managed super funds, and small-to-medium enterprises that wish to invest in their own premises.

For property owners, now could be the time to list, and tap into strong demand from both investors and owner occupiers. 

“Our latest edition of Raine & Horne’s Commercial Insights report shines a spotlight on each area of the market right across Australia. With details of recent sales results, yields and market supply/demand dynamics, it is essential intel for both buyers and owners of commercial assets,” concluded Mr Nicholl.

For further media information, contact:

Ava Crawford, Head of Marketing, Raine & Horne Group on 0402 304 331

[1] https://www.rba.gov.au/monetary-policy/rba-board-minutes/2026/2026-02-03.html

[2] https://www.rba.gov.au/monetary-policy/rba-board-minutes/2026/2026-02-03.html

[3] https://www.abs.gov.au/media-centre/media-releases/household-spending-down-04-december

[4] https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-falls-41