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Investor sentiment rebounds amid commercial property market recovery
Investor sentiment has rebounded in Australia’s commercial property market with one city leading the comeback, as capital flows accelerate.
New research has revealed a turning point in the Australian commercial market, with the volume of capital deployed seeing a steady rise in the past 15 months.
According to recent data from Savills Australia and New Zealand, there are signs of renewed confidence in the market, particularly in Sydney, which is driving the bulk of investment activity.
Savills Australia and New Zealand’s head of capital transactions and advisory, Ben Schubert, said capital flows are accelerating in Sydney, leading to increased confidence in the market.
“We’re seeing a concentration of capital into Sydney like never before,” Schubert said.
The Harbour City makes up 85 per cent of national CBD office investment so far this year, which is well above the 10-year average of 49 per cent.
“That 85 per cent share speaks volumes about Sydney’s global appeal and market depth,” Schubert said.
The report attributed much of the momentum to cross-border capital, as international investors have driven 73 per cent of Sydney’s CBD office deals in 2025 to date.
This marks a major rise on the 10-year average of about 50 per cent.
“The cross-border share of CBD office investment is a clear sign offshore capital sees this market as not just safe, but a clever choice,” Schubert said.
“These are long-term plays on quality, location, and return potential.”
There are multiple factors at play in Sydney’s dominance, including a steady return to the office, improved transport connectivity, new metro stations, and more.
“Global capital gravitates towards liquid, high-quality markets, and Sydney continues to stand out for its scale, stability, and fundamentals,” Schubert said.
Savills said that, with some investors remaining on the sidelines amid global uncertainty, Australia’s wider macroeconomic picture is becoming more appealing.
“Inflation is moderating, wage growth and tax cuts are boosting household income, and interest rates are expected to ease further,” it said.
Savills Australia and New Zealand national director of capital markets research, Chris Naughtin, said that improving macro conditions are clearing the way for stronger investment performance and renewed capital deployment for the rest of this year and into 2026.
“There’s a convergence of factors – stabilising values, pent-up capital, and better financing conditions – that will unlock a more active investment market over the next couple of years,” he said.
The retail sector, which is regaining investor attention, is now poised as an increasingly attractive investment due to high income returns and a more positive consumer outlook.
“The sector’s share of investment volumes has nearly doubled from a pandemic low of 16 per cent to just under 30 per cent this year, reflecting growing institutional investor confidence in its recovery story,” Naughtin concluded.
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