The Australian commercial real estate market is in a state of transformation. Economic shifts, changing work habits, and technological advancements are reshaping the landscape, offering both opportunities and challenges for property owners and investors.
Staying ahead of these trends requires a strategic approach, an eye for emerging patterns, and a firm grasp of what drives value in today’s market.
Whether you’re a seasoned landlord or considering your first commercial property investment, understanding these changes is essential for success.
At Elders, we’ve been closely monitoring these developments, and we’re here to guide you through the emerging landscape of commercial property through 2025 and beyond.
Emerging Trends in the Australian Commercial Real Estate Market
Flexible Workspaces and Hybrid Models
The rise of remote work and hybrid office models is redefining how companies use commercial space. Traditional office demand is waning in favour of adaptable workspaces designed to meet flexible workforce needs. Co-working hubs and serviced offices are on the rise, positioning themselves as attractive options for businesses seeking agility.
Insight: Consider redesigning current office spaces to cater to modern tenants or investing in properties that align with the shift toward flexibility.
The Push for Sustainability
Australia’s commercial real estate market is increasingly aligning with global sustainability goals. Green certifications and energy-efficient buildings are becoming essential for attracting high-quality tenants and buyers.
Properties with solar panels, water-saving measures, and environmentally friendly construction are seeing growing demand.
Insight: Invest in upgrades that improve your property’s environmental impact. Sustainable buildings can command higher lease rates and deliver long-term benefits.
Technology Transforming Commercial Spaces
The integration of technology is no longer a trend—it’s a necessity. Smart buildings equipped with automation, IoT devices, and advanced security systems are now standard expectations in commercial real estate.
Insight: Evaluate your property’s tech-readiness to stand out in an increasingly competitive market. Investing in smart upgrades can help future-proof your asset.
Industrial Property Remains a Hot Commodity
The boom in e-commerce continues to fuel demand for industrial warehousing and logistics spaces. As online shopping grows, efficient storage and distribution hubs will remain critical for businesses.
Insight: If you’re considering an investment, industrial properties present a strong value proposition. Look for spaces close to major transport hubs for maximum ROI.
Retail Spaces Redefining Experiences
Brick-and-mortar retail is evolving into a space for experiences rather than just transactions. Stores are transforming into destinations that combine shopping with entertainment and food services.
Insight: Retail landlords can thrive by working with tenants who prioritise innovative experiences and diversify offerings in their properties.
Regional Markets Gaining Momentum
While CBDs remain critical hubs, regional commercial real estate markets have gained traction due to lifestyle changes and decentralisation trends. Businesses are seeking opportunities outside of metropolitan areas to save on costs and align with workforce migration patterns.
Insight: Investigate commercial property prospects in regional areas where development and demand are growing. These locations often present lower costs with untapped potential.
Breaking it Down
Office
Thanks in part to increased supply Australia’s CBD office vacancy increased marginally from 13.6 to 13.7 per cent over the six months to January 2025 according to the Office Market Report released by the Australian Property Council recently.
The report found the non-CBD office vacancy rate stayed at 17.2 per cent, with the overall vacancy rate for both the CBD and non-CBD markets increasing 0.1 per cent to 14.7 per cent.
The next six months are set to see 333,000 sqm of supply come online, well above the historical average of 237,554 sqm, according to the report.
This supply is spread out across most capital cities – Sydney (83,048sqm), Melbourne (54,327sqm), Brisbane (43,700sqm), Canberra (87,011sqm), Adelaide (23,826sqm) and Perth (41,193sqm).
On a longer timeframe, Sydney is set to see 277,048sqm of new office supply come online by 2027, with almost half of this space already pre-committed to.
In Melbourne, 252,627sqm will come online by 2027 with 26.9 per cent committed to, while Brisbane will see 162,630sqm of new supply with 67.9 per cent pre-committed to.
Industrial and Logistics
It is expected that demand for high-quality assets in core locations will remain strong.
Rental trends are anticipated to vary, with some precincts experiencing limited growth while others witness further increases driven by persistently low vacancy rates.
In select markets, occupiers are leveraging rising incentives and favourable conditions to secure improved lease terms, driving increased leasing activity this year.
It’s best to consult your local expert in the area or region you are looking to invest.
Retail
Low occupancy cost ratio, sub 5% vacancy rates, lack of new supply, resilient retail sales and modest growth in online spend point to continuing positive re-leasing spreads in the retail market.
Living
Capital city vacancy should continue to drift lower as apartment supply hovers at its trough level of 50,000 pa.
Experts see rents moving higher, by +25% over the next five years. The current 20%-30% premium for new builds over older vintage assets is likely to further support price growth.
Challenges Ahead
While there are plenty of opportunities to capitalise on, challenges persist in the Australian commercial real estate market.
Interest rate uncertainty, construction delays and fluctuating consumer trends need to be part of your consideration as an investor or landlord.
Navigating these challenges requires adaptability and a forward-looking approach.
Seek the guidance of market experts like Elders commercial agents in your area to help you analyse risks and pinpoint opportunities that align with your property objectives.