According to Knight Frank’s latest Australian Capital View Q3 2025 research, total investment volumes rose strongly in the third quarter to $13.5 billion, marking the strongest volume since Q3 2022.
This brings the 2025 year-to-date investment to $31.9 billion, substantially improving on activity in 2023 and 2024, when investment was $22 billion and $25.3 billion, respectively, over the same period.
The living sector led transaction activity in Q3 with a total of $5.1 billion, supported by continued strong performance in retail ($2.9 billion) and industrial ($3 billion) sectors.
Knight Frank’s research revealed that average prime yields tightened in the Sydney CBD for the first time since 2021, highlighting the underlying strength for premium assets.
This tightening was driven by a 25 basis point reduction in yields in the core to an average of 5.75 per cent.
“Transaction volumes are expected to remain elevated over the final quarter of the year, with several significant deals in due diligence or in the process of marketing campaigns across all sectors,” Ben Burston, Chief Economist and Head of Research & Consulting at Knight Frank Australia said.
Cross-border investors have emerged as the most active buyer type in Australia’s capital markets in 2025, accounting for 41 per cent of all purchasing activity over the year to the end of September.
These international investors have acquired $11.3 billion in assets, with Japan, South Korea, and the US contributing the majority of this cross-border capital.
Institutions were the second most active buyer group, acquiring $6.7 billion in assets and accounting for 24 per cent of total activity, followed by private capital at 21 per cent of transactions.
Australia has attracted the highest volume of cross-border capital within the Asia-Pacific region over Q3, at US$5 billion, with investment primarily directed to the living and industrial sectors.
This places Australia ahead of Japan (US$3.5 billion) and South Korea (US$2.3 billion) in terms of cross-border investment attraction.
The broader Asia-Pacific commercial real estate market has also shown remarkable strength, with investment volumes reaching US$63.8 billion in the third quarter of 2025.
This marks the highest level on record and represents a 56.8 per cent increase compared to the same period last year.
Knight Frank Partner and Head of Capital Markets Australia, Michael Kwok, noted the changing investor sentiment in the market.
“Investors are becoming increasingly confident that asset valuations have reached their cyclical lows,” he said.
“They are now looking to reposition their portfolios in preparation for the next growth cycle, which will drive increased transactions.”
The report indicates that tightening yields for core assets signal the beginning of market recovery.
“The recovery is expected to start with core assets before progressively expanding out into surrounding precincts,” Mr Burston said.
Cross-border investment into the Asia-Pacific region gained significant momentum over Q3, totalling US$17.8 billion during the quarter, up 72.1 per cent from Q2 and 28.6 per cent year-on-year, demonstrating growing international confidence in the region’s property markets.
