Australian Real Estate Lenders Maintain Appetite Amid Shifting Sector Preferences

Survey Overview and Lender Sentiment

A recent CBRE Research survey, conducted in the first half of 2026, gathered feedback from 44 key commercial real estate lenders, including local and international banks and non-bank institutions. The survey aimed to assess lender sentiment amid ongoing global economic uncertainty, shifting interest rate expectations, and changing sector preferences across the commercial property market.

Despite elevated uncertainty, lenders remain willing to expand their commercial real estate loan portfolios. According to the survey, 45% of respondents indicated a desire to grow their exposure to commercial real estate, while only 5% expressed intentions to reduce lending activity. The findings suggest lenders remain selective but generally positive toward high-quality assets with strong operating fundamentals.

CBRE Managing Director of Debt & Structured Finance Andrew McCasker said lenders continue to prioritize assets with stable income performance over speculative opportunities.

“We are seeing a positive appetite for lending to quality assets with a focus on assets with strong existing fundamentals, rather than speculative opportunities,” McCasker said.

Shifts in Sector Preferences

The survey highlighted notable changes in lender preferences across different real estate sectors. Interest in the industrial sector declined by more than 20%, marking the largest drop and the lowest level recorded since the survey began in 2023. CBRE attributed the decline to a re-weighting of sector preferences rather than weakening industrial market fundamentals.

Conversely, lender interest in stabilized office investments increased by 18%, representing the first increase in three years. Sentiment toward hotels and student accommodation also strengthened, reflecting growing lender confidence in operational real estate sectors supported by steady demand and income performance.

The increased interest in hotels comes as many lenders favor stabilized hospitality assets with demonstrated cash flow performance and resilient travel demand. Continued recovery in international and leisure travel activity, combined with limited new hotel supply in some markets, has helped support the sector’s appeal despite broader economic uncertainty.

CBRE Debt & Structured Finance Director Will Edwards said tightening supply conditions and rising construction costs are influencing lender sentiment across multiple sectors.

“The rise in investment in stabilised office assets coincides with tightening supply nationally, worsened by rising construction costs,” Edwards said. “We are also seeing this play out in the decline in build-to-sell interest. As feasibility pressures rise the scope of investment into the sector is limiting over the short term.”

Interest Rate and Credit Margin Expectations

Expectations regarding interest rates remain divided among lenders. More than 75% anticipate at least one additional rate hike during the current cycle, while 35% expect two or more increases. The uncertainty surrounding future rate movements is contributing to a more cautious lending environment in certain segments of the market.

Credit margin expectations have also shifted in recent months. While a slight majority of lenders still expect credit margins to remain stable, 34% now anticipate an increase of at least 10 basis points over the next three months, up from just 5% in the previous survey conducted in late 2025. The proportion of lenders expecting margin stability has declined from 80% in November to just over 50% in the latest survey.

Challenges and Constraints

Elevated construction costs remain the most significant challenge facing lenders in the commercial real estate market. Rising interest rates and geopolitical uncertainty are also affecting lending conditions and investment confidence.

Development feasibility constraints continue to concern lenders, with many placing greater emphasis on current operating performance when evaluating refinancing opportunities. This trend is particularly relevant for hospitality assets, where lenders are increasingly focused on demonstrated occupancy, rate performance, and cash flow stability.

The combination of higher interest rates, construction cost inflation, and economic uncertainty is expected to dampen acquisition and development loan activity over the next 12 months. Bank lenders are also adopting a more cautious stance toward residential-to-sell construction lending through stricter pre-sale requirements.

Outlook

Overall, Australian real estate lenders are maintaining a measured approach toward new lending opportunities, focusing on sectors and assets with strong existing fundamentals. While challenges related to rates, construction costs, and geopolitical uncertainty persist, the appetite for quality lending remains positive.

Hotels are among the sectors benefiting from this shift toward operationally resilient assets, as lenders increasingly favor stabilized properties capable of generating consistent performance in a more uncertain economic environment.