After a period of cautious navigation, the Australian commercial property market demonstrated a powerful resurgence throughout 2025, with total transaction values surging by a remarkable 27% to reach an impressive $85.58 billion. This substantial increase from the $67.40 billion recorded in 2024 signals more than just a return to form; it reflects a fundamental evolution in investor strategy. A key indicator of this market maturation was the average transaction size, which climbed 24.6% to $9.49 million. This growth, outpacing both inflation and cap rate compression, points directly to genuine capital value appreciation. The data reveals a clear pivot away from opportunistic, short-term trading toward more deliberate and strategic capital deployment. Institutional, private, and offshore investors alike displayed a renewed focus on securing high-quality, long-term assets, underscoring a collective confidence in the market’s underlying strength and future potential.
A Tale of Two States: Queensland’s Ascent and Victoria’s Shift
The national recovery was not uniform, with state-level performance revealing divergent paths and shifting investor priorities. Queensland emerged as the undisputed leader, experiencing an extraordinary 61.1% surge in transaction volume, which soared to $21.35 billion. This stellar performance meant the Sunshine State captured nearly a quarter of all commercial property activity across the nation. The growth was not just in volume but also in the scale of investments, as the average deal size in Queensland jumped by an impressive 56.2% to $10.79 million. This influx of capital highlights a strong investor appetite for the state’s assets, driven by its robust economic fundamentals and a perception of a more favorable investment climate. The sheer magnitude of this growth positioned Queensland as the primary engine of the national market’s rebound, attracting significant attention from domestic and international players seeking to capitalize on its momentum.
In stark contrast to Queensland’s meteoric rise, Victoria’s market experienced a period of recalibration. The state’s share of the national market volume decreased from 24.3% to 20.2%, as its total transaction value dipped by 5.5% to $17.30 billion. This decline suggests a strategic reallocation of capital, with investors reportedly expressing a preference for states with more competitive tax settings and less regulatory friction. While Victoria remains a significant market, this shift indicates that investors are becoming increasingly discerning about the jurisdictional landscape. Elsewhere, the national picture was one of steady progress. States such as Western Australia and South Australia posted modest but positive gains, contributing to the overall national recovery. This varied performance across the country underscores a more nuanced and sophisticated approach from investors, who are now meticulously weighing state-specific economic policies and growth prospects in their allocation decisions.
Sector-Specific Dynamics Reshaping the Market
An in-depth analysis of individual property sectors reveals a multilayered recovery, with industrial and retail assets leading the charge. The industrial sector solidified its position as the market’s dominant force, accounting for 31.1% of all transaction volumes. Its total value grew by a healthy 27.6% to $26.58 billion, a testament to the sector’s resilience and enduring appeal. This performance was underpinned by historically low vacancy rates and the relentless expansion of e-commerce, which continues to fuel demand for logistics, warehousing, and last-mile distribution centers. Meanwhile, the retail sector mounted a robust comeback, with transaction volumes climbing an impressive 43.8% to $18.90 billion. Even more telling was the 50.5% growth in average deal size, signaling a return of large-scale institutional investment. The demand was particularly strong for non-discretionary retail assets, such as supermarket-anchored neighborhood and subregional centers, which offer reliable income streams and are seen as defensive plays in a dynamic economic environment.
The office, hotel, and alternative asset classes also contributed significantly to the market’s renewed vigor, each telling a unique story of adaptation and opportunity. Office deals increased by 28.1% to $16.17 billion, though the market exhibited a distinct flight to quality. Investors showed a clear preference for premium, well-located CBD towers with modern amenities and strong environmental credentials, while some secondary and suburban markets experienced weaker conditions. The hotel sector, rebounding from earlier challenges, saw transactions rise by a strong 42.5% to $4.72 billion as tourism and corporate travel normalized. However, the most dramatic growth was observed in the “other” category, which includes assets like childcare centers, service stations, and assisted living facilities. This segment jumped by a staggering 80.5% to $9.04 billion as investors aggressively pursued defensive assets characterized by long leases and secure, often government-backed, income streams, reflecting a broader search for stability.
Strategic Shifts and Future Outlook
The only segment to witness a contraction in total volume was development sites, which fell 18.5% to $10.16 billion. This decline does not suggest a lack of confidence but rather a strategic realignment in a rate-sensitive environment. Despite the lower overall volume, the average deal size in this sector increased significantly, reaching $21.58 million. This paradox indicates a market shift away from numerous smaller projects toward a more concentrated focus on fewer, larger-scale, and well-capitalized developments. Developers and investors became more selective, prioritizing prime locations and projects with clear paths to profitability, thereby mitigating risks associated with fluctuating construction costs and financing conditions. This calculated approach reflects a mature market adapting to new economic realities, where strategic patience and a focus on high-conviction opportunities have replaced the more speculative activity seen in previous cycles. The trend underscored a broader theme of 2025: a flight to quality and scale across all asset classes.
Looking back, the trajectory of the market in 2025 was heavily influenced by investor sentiment surrounding interest rates, which became the pivotal factor shaping capital deployment. The year’s activity demonstrated a clear and sustained focus on high-quality, income-producing existing stock, a trend that was magnified by the scarcity value and rising replacement costs of well-located assets. As the market moved through the year, the prospect of easing monetary policy began to fuel optimism for a potential recovery in development activity from its subdued levels. The strategic decisions made by investors—prioritizing stable income, prime locations, and asset quality—established a solid foundation. The rebound was not just a recovery in numbers but a qualitative shift toward a more resilient and strategically minded market, setting a new tone for investment activity.
