This year's commercial property landscape looks quite different to the previous - and thankfully in a good way. Retail assets are finally back in favour after a battering from economic downturns. And although industrial assets have come off the boil, it’s only been by a few degrees, sales in the sector accounting for about half of last year’s total CRE transactions, down from 60 per cent in 2023. Savills analysts tag industrial to remain a firm favourite in 2025, noting that “a strategic recalibration is underway as investors deploy capital to develop or reposition properties in high-demand, growth-oriented markets, aiming to expand sector exposure and enhance returns”. Meanwhile office markets are also showing considerable recovery thanks to a notable increase in offshore investment and the number of workers flowing back into offices continuing to rise. 

Investors and property owners can breathe easier, too, analysts across the board forecasting increasingly favourable conditions in coming months. “The broader commercial property market is set for a dynamic shift,” says Ray White’s Vanessa Rader, adding that any interest rate reductions will further “reignite transaction activity across all sectors”. 

Shoppers back in stores

Among the waves of data signalling retail’s rebound is the newly released Australian Real Asset Review Q1 2025 from Dexus Research (Australian Real Asset Review Q1 2025 | Dexus). In regard to values, the report reveals that in the year to November 2024, retail unlisted funds significantly outperformed the wider market, posting a total return of -0.5% in comparison to the overall market’s -9% per annum return. 

Consumer behaviour is another highlight, particularly the robust 7% hike in spending during the two weeks surrounding the Black Friday sales compared to 2023. Spending on discretionary goods surged by a healthy 11%, another solid indicator of a more buoyant market, while overall spending was up 3% in the year to November. 

Eat streets 

Even the fiscally fraught hospital industry - in headlines recently for a spate of closures - has received a glimmer of hope in the form of a 3.6% rise in consumer spending in cafes and restaurants over the past 12 months. On the flipside, sales of household goods, liquor and in department stores are down a tad over 1% compared to the previous 12 months. But online shopping looks like going nowhere but up, with the 8.7% year-on-year jump in internet sales a positive sign not only for online marketers but also for stakeholders and investors in the logistics and warehousing sectors. 

As for retail next year? It’s all systems go. Dexus Research anticipates an “increase in headline retail sales growth in 2025 due to a significant turnaround in real per capita spending”. Analysts noted that while per capita spending has been “unusually negative” it should return to more normal levels in 2025 “given falling mortgage rates, rising incomes and easing cost of living pressures”.

Firm favourites

After quite a lull throughout 2022/23, a Savills report released this week  reveals that offshore capital is back, accounting for 56% of investment in Sydney’s office market in the year to October. Capital from Japan, Singapore, Europe and the US has been leading the charge. 

Stakeholders large and small are taking advantage of emerging trends and embarking on “counter-cyclical investment” strategies, Savills notes. For example, Quintessential Equity’s 2023 acquisition of the 18-storey Sydney CBD office tower known as One Margaret Street involves plans to invest $A90 million in rejuvenation plans that include transforming it into an all-electric building, thus enhancing the property’s sustainability factor. Boutique property fund manager Forza Capital has continued its strategy of acquiring smaller office buildings on Sydney’s CBD and fringe by snapping up a heritage-listed five storey office building at 223 Liverpool Street Darlinghurst for $A64.5 million. “This acquisition aims to leverage demand from a diverse range of tenants who typically do not seek space in CBD locations,” the Savills report says. 

Slowly but surely

Following the push by major corporations and the NSW Government for workers to come back to the office, Business Sydney executive director Paul Nicolaou said this week that more small and medium businesses are also encouraging staff to attend their offices “at least three to four days a week”.

“That’s important,” Mr Nicolaou told the media. “The more people we get into the city the better. One employer told me if ‘I don’t see them, I don’t need them’.” At the same time examples of employers upgrading their premises in a bid to attract workers back are increasing. Real estate agent Stuart Rodriguez, a director of Fringe Commercial told the media his agency leased an 1150 sqm property in late 2024 to an employer whose aim was to attract employees into the office with the promise of nicer views, a more modern space and new furniture.