Australia: Commercial Property Sector continues its recovery with tightening supply

RICS APAC Commercial Property Monitor, Australia, Q4 2025

The latest APAC Commercial Property Monitor published by the Royal Institution of Chartered Surveyors (RICS) has confirmed that the commercial property sector is continuing its march into positive territory for the third quarter in a row amidst mixed signals for future performance.

The headline Commercial Property Sentiment Index (CPSI) has been recorded at +13, improving slightly from +10 in the third quarter of 2025.

Occupier demand across all indices softened with office moving from +33 to +31, industrial +28 to +23 and retail retreating into negative territory moving from +6 to -5.

This is opposed to availability which also dropped across all categories with office moving from +17 to +4, industrial from +13 to +10, retail from +15 to +2. Inducements followed suit by also reducing for industrial and retail but with a slight rise for offices which moved from +6 to +7.

Respondents comments indicate that this could be the result of tightening of supply reflecting the lack of development starts over the last few years.

Consistent with the trends in availability and inducements the chill on development starts is being reported as beginning to thaw with the category recording an overall shift from -26 to -22 with office moving from -33 to -30, industrial moving from -23 to -7 and retail moving from -21 to -29. Nonetheless all categories still remain in negative territory.

Looking ahead though, three month rental expectations improved from +21 to +29 overall with strong gains across all the three categories of office, industrial and retail. Three month capital value expectations also rose from +28 to +33 across all categories except industrial which moved slightly backward to +45 from +46.

Investment enquiries all rose with the overall reading moving from +28 to +32 and all categories moving ahead.

Over the twelve month forecast though 12 month rent expectations took a backwards step while still remaining in positive territory moving from +36 to +28 with categories of office, industrial and retail recording lower values. 12 month capital expectations also remained positive with a more positive reading of +35 from +29, with office moving from +28 to +37, industrial moving backwards a little to +46 from a high base of +48. The stand out was retail which moved into significantly more positive territory of +23 from +12.

In a signal international capital is returning to Australia, potentially driven by geopolitical tensions and more attractive market conditions, foreign enquiries strengthened into more positive territory with an overall reading of +25 from +13 with office moving from +9 to +33, industrial remained relatively steady at +21 from +19 and retail also moving from +12 to +21.

In terms of current value the majority of respondents believe that the market is either at fair value or expensive, with the majority recording that the property cycle is either at early upturn or mid upturn.

Vishant Narayan FRICS RICS Australasian Board Member

“The Australian property market continues to strengthen following its move into positive territory in Q2 2025. If these trends continue then we would expect to see demand grow albeit constrained and an increasing appetite for development. This may be offset however by deteriorating credit conditions if interest rates continue to rise in Australia.

Despite inflation uncertainty, the majority of respondents viewed the commercial property cycle as being in an Early Upturn state (52%) the strongest indicator of positive growth sentiment since pre-Covid.”

Read the full report.