Australia’s commercial property market closed 2025 with transaction volumes reaching $85.58 billion across 9,015 sales, marking a 27 per cent increase over 2024’s $67.40 billion. The headline growth masks diverging geographic preferences, with Queensland surging while Victoria declined, alongside evolving sector appeal and significantly larger average deal sizes signalling a genuine return in market confidence.
Queensland emerged as the clear winner, with transaction volumes growing 61.1 per cent to $21.35 billion, capturing nearly 25 per cent of national activity. The state’s appeal extends beyond Brisbane alone to encompass industrial demand along growth corridors, retail centre resilience, and genuine scarcity of investment-grade stock in locations such as Gold Coast and Sunshine Coast. The average transaction size jumped 56.2 per cent to $10.79 million, indicating substantial capital deployment in quality assets rather than opportunistic trades.
Victoria experienced the opposite trajectory, declining 5.5 per cent to $17.30 billion and slipping to 20.2 per cent of national activity from 24.3 per cent in 2024. The state’s commercial property tax settings continue deterring capital, with sophisticated investors simply choosing alternative markets offering comparable returns without additional cost burdens. Victoria’s challenge extends beyond reversing this decline, to restoring confidence the investment environment as not to deteriorate further.
Western Australia posted solid 5.7 per cent growth to $4.63 billion, demonstrating sustained momentum beyond resource sector volatility. Critically, east coast investors are increasingly targeting WA opportunities, recognising the state’s economic diversification and relative value compared to east coast pricing. The average deal size reached $6.14 million, up from $5.67 million, reflecting gradual capital appreciation.
South Australia delivered standout growth with transactions climbing 10.3 per cent to $3.91 billion. The state’s infrastructure investment pipeline and more competitive pricing relative to eastern capitals continue attracting buyer interest. The ACT recorded modest growth despite public sector uncertainty, while Tasmania saw strong interest in retail and industrial assets, with transactions reaching $593 million.
Industrial property retained its position as Australia’s most-traded sector at 31.1 per cent of volumes, reaching $26.58 billion, up 27.6 per cent from 2024. The sector’s fundamentals remain compelling: low vacancy rates, limited development pipelines, and ongoing e-commerce and logistics demand. Average transaction sizes reached $6.05 million, up from $5.20 million, as buyers recognise existing stock carries genuine scarcity value with replacement costs remaining elevated. Also the wide variation of industrial offerings making it attractive to a mix of first time buyers, investors, owner occupiers as well as institutional investors.
Retail delivered the year’s most notable shift, with volumes climbing 43.8 per cent to $18.90 billion, representing 22.1 per cent of total activity. Average deal sizes surged 50.5 per cent to $11.72 million, signalling substantial repricing. Sub-regional and neighbourhood centres, particularly supermarket-anchored assets in growth corridors, demonstrated the resilience buyers are willing to pay for. Assets in established suburbs offer stable cashflows without greenfield development risk, and buyers are backing that stability with capital.
Office property accounted for 18.9 per cent of volumes at $16.17 billion, up 28.1 per cent, though this masks divergent performance within the sector. Premium CBD assets in Sydney, Brisbane and Melbourne attracted capital, while suburban markets have had mixed fortunes with elevated vacancies and quality disparity. The average transaction size reached $11.19 million, up from $8.41 million, as buyers remained highly selective.
Hotels recorded $4.72 billion in transactions, up 42.5 per cent from 2024, with average deals reaching $13.88 million. Strong occupancy data and robust tourism activity, both domestic and international, are driving buyer interest across city and regional locations at varied quality levels. Pubs remain a particularly hot investment class, with their strong locations and income streams not going unnoticed by private and institutional buyers alike. This momentum looks set to continue as offshore investors respond to Australia’s tourism recovery and reputation as a stable investment destination.
Development site investment declined 18.5 per cent to $10.16 billion, though average transaction sizes jumped to $21.58 million, indicating larger projects changing hands. This sector remains strongly dependent on interest rate settings. Developers need confidence that construction finance costs won’t escalate mid-project and that end buyers will have access to acquisition debt at rates supporting projected yields. Activity in 2026 will remain constrained until interest rate settings stabilise, with projects continuing to struggle against feasibility thresholds in the current environment.
The “other” category, encompassing assets such as childcare centres, service stations, and aged care facilities, climbed 80.5 per cent to $9.04 billion. This growth represents renewed confidence in alternative property classes offering defensive income characteristics. Childcare assets continue attracting capital seeking government-supported income, while service stations offer long lease terms and essential service characteristics.
The most significant market indicator sits in the average transaction size, which climbed to $9.49 million across all sectors, up 24.6 per cent from $7.62 million in 2024. This increase exceeds both inflation and cap rate compression, indicating genuine capital value appreciation. Institutional capital has returned to the market, private investors are accepting higher entry prices for quality assets, and offshore buyers are paying premiums for Australian commercial property.
The 2025 transaction data suggests a market transitioning from opportunistic positioning toward strategic-based capital deployment. Queensland’s growth reflects demographic certainty, industrial’s dominance demonstrates supply constraints, retail’s resurgence confirms operational resilience, and rising average prices indicate buyers see value despite higher entry costs. The critical question for 2026 centres on interest rate policy. If rates fall as markets anticipate, development activity should accelerate meaningfully, while continued focus on existing stock will reflect replacement cost economics and genuine scarcity value in quality assets.
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Vanessa Rader | Ray White Head of Research
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