Foreign Capital Lifts Australia's Property Market

Two interest rate cuts are drawing more global capital into Australian commercial real estate, pushing property deals up by 13% in early 2025. However, rising demand also highlights the uneven level of interest across different asset classes.

Commercial property transactions in Australia reached $15.5 billion during the first half of 2025. Investors showed renewed confidence as lower borrowing costs and expectations for further rate cuts created a more attractive environment. The rise in activity has occurred despite ongoing geopolitical tensions, reinforcing the view that Australia is seen as a relatively safe destination for investment.

Industrial and logistics assets led the growth, recording $5.4 billion in transactions, nearly double the amount from the same time last year. Much of this came from portfolio deals and strategic moves by firms with established logistics operations. Retail property activity also improved, reaching $4.7 billion, a rise of 29% after years of rental adjustments made the sector more appealing.

In contrast, office property saw $3.8 billion in transactions, an 11% fall compared to the previous year. Elevated asset prices and prolonged negotiation periods delayed major sales. Even though part of Sydney’s Salesforce Tower was sold, the office sector is awaiting the finalisation of key deals, including a major stake in Grosvenor Place.

A notable trend is the shift in investment towards core markets beyond Sydney, with interest growing in Brisbane, Melbourne and Perth as inner city opportunities become less available. Investors are clearly chasing value and view Australia as a promising long-term option, supported by strong population growth and consistent economic performance. Foreign investment increased by 17% over the previous year, making up 28% of total spending. North American investors were the most active with $1.7 billion in acquisitions, while Japanese buyers closed $900 million in deals. Although Japanese investment saw a slight dip, this may reflect a shift in monetary policy at home that is encouraging investors to turn their focus inward.

Source: The Australian, RealCommercial, Cushman & Wakefield