Retail property has emerged as the standout performer in Australia’s commercial property market, posting a remarkable 19.2 per cent surge in transaction volumes during the 2024/25 financial year, according to new research.
Ray White Group Head of Research, Vanessa Rader, revealed that while total market activity reached $59.9 billion across 7,754 transactions, the market experienced an 18.5 per cent reduction in deal numbers, masking a significant sector rotation.
“Australia’s commercial property landscape experienced a dramatic reshuffling during the 2024/25 financial year,” Ms Rader said.
“While retail emerged as the standout winner with a remarkable 19.2 per cent surge, medical and childcare assets faced a substantial 28.9 per cent decline.”
Ms Rader said that institutional and offshore capital aggressively pursued fewer but significantly larger transactions, fundamentally altering the competitive dynamics across asset classes.
Industrial property maintained its position as the largest sector by volume, attracting $19.0 billion in transactions during 2024/25, representing 31.6 per cent of total market activity.
“Despite a modest 1.6 per cent decline from the previous year’s $19.3 billion, the industrial sector demonstrated continued appeal across traditional warehousing, logistics facilities, and the increasingly significant data centre segment,” Ms Rader said.
“The sector’s appeal stems from its defensive characteristics, low vacancy rates, and continued demand from e-commerce and logistics operators.”
The retail sector’s substantial recovery validated predictions of a retail renaissance, underpinning 24.3 per cent of total market activity with $14.6 billion in transactions.
“This recovery is underpinned by limited new supply, strong population growth, and successful adaptation of retail formats in line with new trends,” Ms Rader said.
“The sector attracted broad-based investor interest across neighbourhood centres, sub-regional assets, and strip retail locations, with private investors particularly active in the sub-$20 million segment.”
The office sector recorded $12.5 billion in investment activity, representing 20.9 per cent of total market activity and achieving a modest 2.1 per cent increase from 2023/24.
“This continues the structural adjustment within the sector, reflecting ongoing high vacancy rates and the permanent impact of hybrid working arrangements,” Ms Rader said.
“Return-to-work patterns have varied significantly across states, creating volatility in take-up rates and further complicating market dynamics.”
Development site transactions reached $9.4 billion, representing 15.6 per cent of total market activity, though this marked a significant 15.8 per cent decline from 2023/24 levels.
Ms Rader pointed out that medical and childcare facilities generated $1.7 billion in activity but experienced a notable 28.9 per cent decline from 2023/24 levels.
“This reduction reflects increased selectivity from investors in these previously popular alternative asset classes, with buyers becoming more discerning about location, operator quality, and long-term demographic trends,” she said.
Looking ahead, Ms Rader said that modest interest rate reductions experienced in the latter half of 2024/25 have begun to improve market sentiment.
“The expected continuation of rate reductions into 2025/26 is anticipated to provide further stimulus to transaction activity, particularly benefiting sectors with strong fundamentals such as industrial and retail,” she said.
“As we transition into 2025/26, the market is positioned for selective recovery. The data suggests 2024/25 represented a crucial transition year, with asset classes experiencing varied fortunes reflecting their adaptation to post-pandemic market dynamics and evolving investor preferences.”
