Commercial Property 2026: $87.8B Year and What's Next

An 87.8 billion dollar year in commercial property transactions sounds like an unambiguous good news story. A 25.7% jump on the previous year certainly reads that way on the surface.

But headline transaction figures rarely tell the full story, and this year's numbers are shaped by a handful of specific forces: a wave of larger portfolio sales, a state-by-state shift in where capital is flowing, and pockets of genuine strength sitting alongside sectors still working through a difficult few years.

A conversation between Arjun Paliwal, Chris Huxter and Vanessa Rader, Head of Research at Ray White, unpacks what's actually driving this growth, and where the next 12 months are likely to take investors who are considering commercial property for the first time or looking to expand an existing portfolio.

What Happened

The discussion opens with the headline transaction figure of $87.8 billion for the financial year, noting that despite the sharp year-on-year increase, this remains below the peak seen during the pandemic period. Much of the growth is attributed to an increase in larger portfolio sales and smaller investors moving up into the $10–50 million price bracket, rather than a uniform lift across the market.

From there, the conversation moves through a state-by-state and asset-class breakdown, covering Queensland's rise to the largest share of national transaction volume, the resilience of industrial property, a resurgence in retail interest, and a striking increase in aged care and medical transactions. The discussion also examines why quarterly volumes pulled back sharply after a confident start to the year, linking this to a shift in sentiment driven by inflation data and geopolitical uncertainty rather than any fundamental change in market conditions.

The conversation closes with a look at Adelaide's standout office market performance, a discussion of common misconceptions among commercial investors, and a forward looking view on which sectors are likely to dominate industry conversation over the next year.

Key Takeaways

Why the $87.8 Billion Headline Number Needs Context

While the year-on-year increase is substantial, the total remains below the levels recorded during the pandemic period, when transaction volumes exceeded $100 billion. A meaningful share of this year's growth is attributed to an increase in larger portfolio sales, alongside smaller investors moving up into the $10–50 million price bracket, rather than broad-based growth across every segment of the market.

Queensland's Rise to the Largest Transaction Share

Queensland now accounts for roughly a quarter of all commercial property transactions nationally, overtaking Victoria for the second year running. New South Wales remains the largest single state at around 40%, but the shift in Queensland's share reflects a broader movement of capital and investor interest toward that market.

Retail's Comeback Is Structural, Not Just Cyclical

Retail property has performed strongly despite ongoing cost-of-living pressures, a pattern explained by population growth significantly outpacing new retail construction. On a per capita basis, available retail space has effectively shrunk, and demand for convenience-based retail, along with fitness and wellness tenancies, has helped underpin performance. Well-located retail centres also carry redevelopment potential through their large landholdings, adding a further layer of long-term value beyond retail income alone.

Why Investors May Look More Closely at Commercial Property Post-Budget

Recent policy changes affecting residential property have prompted more investors to consider commercial property, a pattern that echoes the shift seen during the low interest rate period, when lower residential yields pushed capital toward higher-yielding commercial assets. The current shift is expected to be more gradual than that earlier period, with more investors likely to research commercial property as a genuine option rather than rush in the way they did back then, and a need for those investors to understand that higher yields typically reflect higher risk.

Why Quarterly Volumes Pulled Back After a Strong Start

Transaction volumes fell from a peak in the $25–27 billion range down to $15–18 billion in subsequent quarters. This decline is attributed to a rapid shift in sentiment following unexpectedly high inflation data and geopolitical uncertainty, both of which prompted investors to delay decisions rather than reflecting any underlying deterioration in market fundamentals. Data reporting lags mean these figures are likely to be revised upward once later transactions are captured.

The Outsized Impact of Large Transactions on Quarterly Data

Because commercial property transactions at the top end of the market are considerably larger than equivalent residential deals, a handful of major portfolio or single-asset sales, such as a large shopping centre or office tower, can meaningfully shift quarterly figures in either direction. This means quarterly volume swings should be read with some caution rather than taken as a direct signal of broad market sentiment.

Industrial Property's Structural Supply Constraint

Industrial property remains the largest single asset class by transaction share, supported by a persistent undersupply of zoned and serviced industrial land across most states. This scarcity, combined with steady demand tied to population growth, manufacturing and logistics, is expected to continue supporting rents and values, even for secondary industrial assets, given the difficulty and cost of bringing new industrial stock to market.

Aged Care and Medical: The Sector With the Sharpest Growth

Transactions in the aged care and medical sector rose 72% to reach $7.23 billion, one of the more striking movements in this year's data. This growth reflects increasing investor interest in an asset class tied to long-term demographic demand rather than short-term market sentiment.

Adelaide's Office Market Is Outperforming Its Size

Adelaide's office market has shown some of the strongest absorption figures in the country relative to its size, supported by a tight supply pipeline, significant infrastructure investment, defence sector activity, and a broader local economy that has drawn increasing interest from interstate and offshore buyers. Comparatively favourable property tax settings in South Australia were also noted as a factor supporting business investment in the state.

The Myth That Commercial Property Delivers Quick Returns

One of the most persistent misconceptions is the expectation of rapid capital growth in commercial property. Commercial property was consistently described as a long-term hold, with values and returns building over extended cycles rather than short-term price movements, and investors chasing quick gains were flagged as more likely to run into difficulty.

Why "Negative Gearing" Looks Different in Commercial Property

Given that commercial property lending typically requires larger deposits, sometimes with loan-to-value ratios as low as 50% for certain asset types such as childcare, and outgoings are often paid by the tenant, the discussion challenges the assumption that most commercial investors are negatively geared in the way residential investors commonly are. The more useful starting point for any commercial purchase, according to the discussion, is clarifying the actual objective, whether that's yield, capital growth, or income growth, rather than assuming a particular tax outcome.

Commercial Property Transaction Data (Financial Year)

• Total transaction volume: $87.82 billion (+25.7% year-on-year)

• Queensland's share of national transactions: approximately 25%

• New South Wales share: approximately 40%

• Industrial property share of transactions: 32.3%

• Aged care and medical transaction growth: +72% to $7.23 billion

• Quarterly volume range at peak: $25–27 billion

• Quarterly volume range following sentiment shift: $15–18 billion

Actionable Lessons for Investors

• Look beneath headline transaction figures to understand whether growth is broad-based or concentrated in large portfolio sales.

• Treat commercial property as a long-term hold; expectations of rapid capital growth are one of the more common causes of investor difficulty in this asset class.

• Clarify your investment objective, yield, capital growth or income growth, before selecting an asset class or price bracket.

• Pay attention to supply and demand dynamics at a local, even street-level, scale rather than relying on broad regional trends.

• Track less obvious indicators such as local unemployment and tenant-industry conditions, particularly for sectors sensitive to competition, like childcare.

• Understand that commercial lending structures, including lower loan-to-value ratios for certain asset types, can materially change the cash flow and gearing profile compared to residential property.

This year's commercial property data tells a more nuanced story than the headline number suggests: genuine strength in industrial and aged care, a retail sector benefiting from structural undersupply, and an office market still working through its post-pandemic adjustment, with pockets like Adelaide already outperforming. For investors weighing a move into commercial property, the underlying message from this data is consistency rather than urgency: understand the specific market and asset class, clarify the objective behind the purchase, and treat commercial property as the long-term holding it's designed to be.

If you want to see how this can apply to your own portfolio, book a free discovery call with the InvestorKit team.