Commercial Property Market Update – Q4 2025

Australia’s property markets entered Q4 2025 with improving private‑sector economic momentum, stubborn inflation, and evolving supply dynamics across residential, office, and industrial segments. This report summarises the key themes shaping performance into 2026, based on ANZ Research and market indicators. Read the full report.

Executive Summary

• Housing prices are 6% higher year‑to‑date, supported by rate cuts, population growth and extremely weak completions.
• Office markets continue to show a strong flight‑to‑quality, with Prime-grade absorption significantly outpacing Secondary space.
• Melbourne faces the largest 2026 office supply pipeline, while Perth enters the year with no new supply, tightening conditions.
• Industrial demand remains strong, though new supply is moderating rental growth and lifting incentive levels.

Market Context & Economic Conditions

Australia’s private sector continued to support economic growth, while household consumption softened through Q3. Inflation progress stalled, complicating the monetary policy outlook, but rate cuts delivered earlier in the year continue to flow through to market sentiment.

Major Trends Shaping the Property Market

Trend 1: Housing supply constraints persist

Completions fell to decade‑low levels, while approvals and commencements began to show early signs of recovery.

Trend 2: Rental pressure intensifies

Housing vacancy rates reached new lows nationally, pushing rents higher across most capital cities.

Trend 3: Office sector bifurcation

Prime assets continue to outperform significantly, with tenants relocating from older secondary buildings.

Trend 4: Industrial supply boom

Elevated approvals and construction activity are contributing to a more balanced supply–demand environment.

Trend 5: Yield tightening expected

Lower interest rates are supporting renewed investor confidence and gradual yield compression into 2026.

Challenges & Risks to Watch

• Inflation remaining at the top of the RBA’s target band, delaying policy easing.
• Record‑low rental vacancy and insufficient new housing supply.
• Heavy office supply pipeline in Melbourne and Canberra in 2026.
• Industrial rental growth moderating as incentives rise in Sydney, Melbourne and Perth.
• Construction costs stabilising but remaining around 40% higher than pre‑pandemic levels.

Future Outlook

The outlook for 2026 points to a steady but uneven property landscape. Industrial assets remain well‑supported despite supply‑driven rental moderation, while office markets will experience divergent outcomes shaped by varied city‑level supply. Residential markets stay constrained until completions recover meaningfully.

Conclusion

Q4 2025 highlights a property market in transition, balancing resilient demand with significant supply constraints and shifting investor sentiment. Organisations that focus on long‑term fundamentals and asset quality will be best positioned for opportunities emerging into 2026.

Next steps

• Download the full version of ANZ Commercial Property Update – Q4 2025.
• Explore more of our Commercial Property banking services.
• Talk to one of our specialists by requesting a call back.