Interest Rate Cuts Drive 13% Increase in Australian Commercial Property Transactions

Interest rate cuts helped propel a robust 13% y-o-y rise in commercial property transaction activity in Australia in H1 2025, according to new CBRE data.

A total of $15.5 billion in office, industrial, retail, hotel and living assets changed hands, buoyed by two interest rates and the expectations of more to follow.

The industrial & logistics (I&L) sector was a key driver, with $5.4 billion in transactions – up 98% y-o-y – buoyed by an uptick in portfolio deals.

Retail transactions tallied $4.7 billion, up 29%, with investors continuing to see relative value in the sector following a rebasing in rents in recent years.

Conversely, the office sector recorded an 11% decline in transactions to $3.8 billion following an improved result in 2024.

CBRE’s Pacific Head of Capital Markets Flint Davidson noted, “Capital continues to back the logistics and retail sectors leading to increased volumes, while in office increased pricing expectations off the back of sound rental growth has created a pricing mismatch, which has reduced volumes.”

“As we have seen in previous cycles, the availability of opportunities in Sydney has diminished and capital has had to shift to markets including Brisbane, Melbourne and Perth to find value,” Mr Davidson added.

CBRE’s Head of Capital Markets Research Tom Broderick said transactions had also declined in the hotel and living sectors, however the outlook remained positive, with the market pricing in more rate cuts in Australia over the coming 12 months.

From a geographical perspective, CBRE’s data highlights that offshore investment in Australian commercial property was up 17% y-o-y in H1, accounting for 28% of the total capital deployed in Australia.

Mr Broderick said Australia’s robust population growth and stable economy was underscoring the appeal of Australia as an investor safe haven.

“The office sector continued to be the primary target in H1, attracting 45% of the total investment from offshore groups, boosted by recent price adjustments and the significant scale individual office assets offer,” Mr Broderick said.

“Industrial & logistics also witnessed substantial foreign investment in H1, indicating broad appetite for this sector.”

CBRE’s data indicates that North American investors dominated offshore activity accounting for $1.7 billion in transactions, underpinned by a favourable exchange rate and the desire for greater global diversification.

Japanese investors followed with $900 million in acquisitions. While this was down on previous years, CBRE’s report suggests that this might reflect a monetary policy shift in Japan, making investors more domestically focused.

Australian Investment Volumes

Source: CBRE Research