Stabilisation, Selective Strength, and Where Value Is Emerging
Brisbane’s commercial property market entered 2026 in a noticeably more stable position than the past two years, as capital markets settle, occupancy improves across multiple sectors, and economic indicators point to a slow but steady strengthening. While elevated interest rates continue to shape investment decisions, sectors such as industrial, retail and prime office are showing meaningful resilience. Meanwhile, shifts in economic policy, labour market dynamics and global geopolitical pressures present a complex backdrop for investors, owners and tenants alike.
Against this environment, Brisbane continues to benefit from its diversified economy, strong population growth, and a solid pipeline of public and private investment.
On Thursday 12 March, guests joined the Opteon team and Anthony De Francesco from Real Investment Analytics for the latest commercial property sector updates. Read on for a summary of their insights.
Capital Markets: End of the Decompression Cycle
After an extended period of yield softening across commercial real estate nationally, 2026 has opened with cap rates largely stabilising across all major sectors. According to the market data presented at Opteon’s recent Commercial Outlook & Networking Event, average Australian cap rates now sit at:
- Office: 6.2%
- Retail: 5.7%
- Industrial: 5.4%
- All property: 5.5%
This stalling of the decompression cycle marks a critical turning point. Buyers and sellers can once again transact with more confidence about forward pricing, albeit in a more selective, fundamentals-led environment.
Macro Conditions: Inflation Sticky, Rates Elevated, Growth Strengthening
Economic conditions remain a major influence on commercial real estate sentiment. Headline CPI rose 3.8% in the year to January 2026, keeping inflation above the RBA’s 2–3% target band. In response to persistent price pressures and elevated capacity constraints, the RBA lifted the cash rate to 4.10% at its March 2026 meeting - the second consecutive 25 bp increase - with policymakers signalling that further tightening remains possible if labour market resilience continues.
Up until the end of March, broader indicators showed improvement:
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Economic activity is strengthening toward trend growth.
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Private consumption is picking up.
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The unemployment rate has eased in recent months, though employment growth is softening.
These conditions support the start of a more predictable commercial market cycle, even if elevated rates continue to place downward pressure on leveraged assets. As always, emerging external risks have the potential to disrupt what was looking to be stable conditions over 2026.
Office Market: Occupancy Rising, but Incentives Still High
Brisbane’s office market is emerging from one of its most challenged periods, with occupancy rates improving across both CBD and fringe precincts. Nationally, office occupancy lifted to 93.8%, with Brisbane outperforming several markets and showing clear signs of recovery.
Key dynamics shaping the office sector:
1. Flight to Quality Intensifies
Premium and A‑Grade assets continue to capture the bulk of enquiry and leasing activity, driven by:
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Tenant competition for amenity-rich, well-located assets
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ESG and wellness requirements
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Desire to attract and retain staff in a hybrid work environment
2. Face Rents Rising, Incentives Still Elevated
Face rents are increasing across major CBDs, including Brisbane. However, leasing incentives remain elevated, reflecting ongoing competition for tenants. Across CBD markets:
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Incentives remain above long-term averages, indicating landlords are still buying occupancy.
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Cap rates remain steady, suggesting investor confidence in long-term performance.
3. Outlook
With absorption improving and limited near-term supply risk, Brisbane’s office market is expected to continue its gradual recovery—particularly for newer, efficient assets. Secondary stock faces more structural headwinds due to ageing infrastructure and escalating repositioning costs.
Industrial Market: Tight Occupancy and Continued Outperformance
Industrial remains one of Brisbane’s strongest-performing sectors, consistent with national trends. Occupancy rates for industrial assets sit at a very tight 98.1%, reflecting deep structural demand and insufficient supply.
Drivers of Strength
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Logistics, 3PL, and FMCG tenant demand remains sticky post‑COVID.
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Supply chain recalibration continues to fuel demand close to population centres.
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Land scarcity in key precincts, particularly the TradeCoast and southern corridor, continues to pressurise rents.
Capital Market Position
Cap rates have stabilised following earlier decompression, positioning industrial as one of the most resilient and institutionally favoured asset classes.
Outlook
Moderating rental growth is expected, especially after the extraordinary 2022–2024 period. However, structural demand remains strong, and Brisbane’s industrial market is set to remain a standout performer for 2026.
Retail Market: Strong Performance Underpinned by Tight Occupancy
Retail continues to deliver solid performance, supported by rising retail demand and tight occupancy across key subsectors. National occupancy for retail centres sits at 98.9%, one of the highest among commercial sectors.
Neighbourhood and convenience-based centres are the strongest performers, buoyed by:
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Supermarket-anchored traffic and ease of parking compared to larger centres
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Population growth
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Increased demand for essential services and medical/health tenants
Specialty retail remains more sensitive to consumer demand and discretionary spending, although the pick‑up in private consumption is providing positive momentum. Most REITs are reporting positive leasing spreads for specialty tenancies.
Capital investment into the sector is evidenced by the recent activity of institutional participants, particularly REITs, across the neighbourhood and sub‑regional shopping centre segments. Charter Hall has established its Direct Convenience Retail Fund (DCRF), a $2.5 billion vehicle primarily comprising neighbourhood and sub‑regional assets. Since December 2025, the fund has deployed approximately $610 million, acquiring six sub‑regional centres.
Further examples include Dexus acquiring a 50% stake in Westfield Chermside for approximately $1.365 billion and Cbus Property’s proposed acquisition of Lendlease’s interest in a $2.4 billion shopping centre fund.
Cap rates remain steady, reinforcing investor confidence in this sector’s cashflow durability.
Alternative Assets: Growing Institutional Appeal
Alternative property sectors—including healthcare, education, life sciences, self-storage and social infrastructure—continue to attract strong institutional interest.
Key insights from the presentation include:
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Alternative assets are mainly concentrated along the eastern seaboard.
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Institutional exposure is largely held in listed vehicles, demonstrating growing maturity.
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Cap rates for many alternative subsectors have narrowed to converge with traditional sectors, reflecting strong investor appetite and defensive income characteristics.
These asset classes are increasingly compelling as investors diversify and seek longer WALE profiles.
Residential & Mixed-Use Influences
While not the core focus of the event, residential dynamics continue to influence Brisbane’s broader commercial environment.
National[DH8] house prices remain resilient, supported by population growth, immigration and supply shortages. However, proposed changes to negative gearing and capital gains tax concessions could reduce investor appetite and potentially slow dwelling price growth.
This may influence future mixed-use and build‑to‑rent feasibility across the city.
Risks to Watch in 2026
The presentation highlighted several domestic and global risks:
Domestic Risks
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Persistently soft economic activity
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Elevated interest rates for an extended period
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Softer labour market conditions reducing consumption
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Potential housing policy impacts on supply and investor behaviour
Global Risks
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Geopolitical tensions (South China Sea, Ukraine, Iran)
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Energy price shocks and inflation pass‑through
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US tariffs and trade barriers affecting global growth
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Changing US Federal Reserve policy and its influence on global capital flows
These factors may influence cap rates, demand, and investment conditions through 2026.
Conclusion: Momentum Meets New Uncertainty
Brisbane’s commercial property market is moving into a more stable and predictable phase, supported by:
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Stabilising cap rates
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Improving occupancy, particularly in office and retail
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Strong industrial fundamentals
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Growing appetite for alternative assets
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Resilient economic underpinnings and population growth
It is too early to determine the full impact of increased geopolitical tensions and oil shocks on the domestic commercial property market. The economic impacts will largely be determined by how long oil supply remains constrained and whether this becomes embedded in inflationary pressures. In past cycles, uncertainty has resulted increased investment in bricks and mortar assets.
However, although elevated interest rates and geopolitical uncertainty remain challenges, recent performance demonstrates resilience. For investors and owners, opportunities in 2026 will be increasingly asset ‑specific, driven by location, ESG alignment, tenant profile, and long-term income stability/growth.
Ben Farquhar
Director - Core Commercial
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DISCLAIMER
This article is produced by Opteon Property Group Pty Ltd. It is intended to provide general information in summary form on valuation related topics, current at the time of first publication. The contents do not constitute advice and should not be relied upon as such. Formal advice should be sought in particular matters. Opteon’s valuers are qualified, experienced and certified to provide market value valuations of your property. Opteon does not provide accounting, specialist tax or financial advice.
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