Commercial Property Deals Surge in Early 2025

Commercial real estate investment is rebounding quickly as investors seize discounted opportunities, but questions remain about long-term asset values. Overall, deal-making surged 28% year-on-year in the first quarter of 2025, with total transactions hitting $6.7 billion according to MSCI data. After a period of steep declines, confidence is returning, particularly in the office sector.

The industry has taken a hit over the past three years, especially offices, which suffered from remote work trends and rising interest rates that eroded demand and value. However, that downward pressure seems to be easing. Office transactions alone jumped 69% to $1.8 billion this quarter, pointing to renewed buyer appetite.

Big-ticket sales have helped drive the recovery. Overseas investors, notably from North America and Japan, played a leading role, investing $2.4 billion and making up 35% of quarterly volume. Sales like a $600 million Sydney office block and a $460 million half-stake in 388 George Street contributed significantly. One of the standout acquisitions was a central Sydney building sold at a 6% yield, highlighting how investors view pricing as hitting its floor.

Wider momentum is building across sectors. Retail led all categories with nearly $3 billion in sales, helped by the record-breaking $870 million sale of Westpoint Shopping Centre. Data centres also saw modest gains from a low base, reflecting diversified interest. The Sydney office market saw over $1.5 billion in transactions alone, making it 2025’s most active city so far.

These early trends suggest that investors are betting the downturn has bottomed out. Values are still well off their peaks, some by up to 30% - but steady yields and repricing are drawing fresh capital back into the market. While uncertainty remains, the scale and pace of new deals point to growing optimism heading into the rest of the year.

Source: Australian Financial Review, CCIM, WeForum