Young Investors Turn to Commercial Property

A new generation of investors is entering the commercial real estate market in search of stronger returns. Despite higher entry costs and associated risks, many see it as a more attractive alternative to residential property. As home prices continue to climb, more Australians, especially younger investors, are considering industrial units and retail spaces. These options offer the potential for better cash flow and higher yields, even though entry-level investments typically start at $100,000.

Commercial real estate has become much more appealing over the past ten years. According to Knight Frank’s Wealth Report 2025, Australia ranked sixth globally for commercial property investment activity. The country recorded year-on-year growth of 57%. High-net-worth individuals have long seen the value in this asset class. In Australia, 62% of self-managed super fund holders with balances above $2 million now hold commercial property investments. This figure is up from 54% in 2015.

Smaller investors are also becoming active participants. The emergence of platforms and services that enable access to industrial and storage properties from under $150,000 is helping lower the traditional barriers. Professional syndicates and buyers' agents often pool investor capital. Some of these businesses also target retail investors, positioning commercial property as a competitive option to traditional residential investments.

The key selling point lies in the returns. Residential property investments in Australia typically yield about 4% gross before expenses. In contrast, commercial property can deliver net returns of 6% or more. Commercial tenants often cover many operating expenses, including maintenance and insurance, which helps improve the net income for investors. However, higher deposits are usually required. Banks may request as much as 40% upfront, and longer lease terms can add to the complexity and commitment involved.

The growing interest in commercial real estate appears to be fueled by better investor education and frustration with the profitability of residential property. As tighter regulation, increased taxes, and lending restrictions make residential investment less appealing, more Australians are looking to commercial assets as a long-term wealth-building strategy. Although not without its own risks, this sector is beginning to shed its image as too complex and is attracting a broader group of investors.

Source: Australian Financial Review, Star Investment, Properties and Pathways

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