In 2025, Australia’s commercial market is defined by sharp contrasts. Office assets continue to face structural challenges, while niche sectors like pubs and unusual specialist-use properties deliver resilience and surprising depth. Understanding the sectors doing it tough helps investors avoid risk and uncover opportunities others overlook.

What Happened

A deep dive with Vanessa Radar highlighted the parts of the market that remain under pressure. Office vacancies are still elevated, particularly in Melbourne, and secondary assets continue to lose tenants to premium buildings with superior amenities. Suburban office markets are shifting again as incentives draw businesses back into CBDs.

Meanwhile, niche asset classes follow their own data trends. Pubs remain tightly held yet highly valuable due to multi-stream income and rising gaming entitlement values. Less mainstream categories such as churches, cemeteries, and brothels display distinct transactional patterns and investor considerations.

Key Findings

1. Offices remain the weakest commercial category in 2025

• Melbourne vacancy levels sit near 18 percent, with high incentives required to attract tenants.
• Older, secondary buildings continue to lose tenants to premium, amenity-rich spaces.
• Construction costs limit new supply, slowing future pipelines in Sydney, Brisbane, and Perth.
• Suburban markets that once benefited from working-from-home trends, such as Crows Nest and St Leonards, now carry vacancies near 29 percent.
• Structural shifts in workplace behaviour continue to influence long-term demand.

2. Office-to-residential conversions still rarely stack up

• Plumbing, structural servicing, and engineering requirements make conversions cost-prohibitive.
• Floor plates and existing layouts are rarely suitable for residential use.
• Student accommodation is one of the few feasible alternatives due to communal design compatibility.

3. Pubs continue to perform strongly in 2025

• Still dominated by private family ownership, limiting turnover and maintaining scarcity.
• Income diversification across food and beverage, gaming, retail, accommodation, and events strengthens stability.
• Gaming entitlements have risen sharply in value over recent years.
• Large metro pubs have transacted above 100 million dollars due to location, entitlement value, and multi-use potential.

4. Niche sectors provide unique opportunities and risks

• Churches: Often converted into residential or boutique retail thanks to distinctive architecture.
• Cemeteries: Highly regulated with complex record-keeping; limited investor appetite.
• Brothels: A legal but tightly regulated sector offering higher yields due to a narrow buyer pool.

Lessons for Investors

• Weak sectors expose risks early, but they also hint at future recovery points.
• Premium office assets continue to outperform and remain the only part of the sector showing early signs of improvement.
• Secondary offices require caution due to rising CAPEX needs and declining tenant demand.
• Niche sectors can deliver strong cash flow, but regulatory and operational due diligence is essential.
• Scarcity-driven markets like pubs remain resilient, even as broader conditions fluctuate.
• Always test feasibility assumptions rather than relying on popular narratives about repurposing or repositioning assets.

Action Steps

1. Review office asset exposure and assess leasing risk across the next 36 months.
2. Prioritise newer, high-amenity assets where tenant demand remains strongest.
3. Validate any conversion strategy through engineering and economic feasibility studies.
4. For pubs, analyse gaming entitlements, operator credentials, and demographic strength.
5. Seek specialist guidance when exploring niche sectors with licensing or regulatory requirements.
6. Watch Melbourne’s trends closely as affordability strengthens and internal migration stabilises.

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