2026-03-02-莱坊-Australian_Capital_View_February_2026_8页_1mb

Australian Capital View Summary (February 2026)

Core Content Overview

The Australian property market experienced strong transaction activity in 2025, with total investment volumes reaching $51.4 billion, a 41% increase from 2024. This growth was driven by rising investor confidence, which has led to improved capital growth across all major property sectors. Despite higher interest rates, the momentum is expected to continue due to strengthening fundamentals and higher income returns.

Key Insights

• Investor Confidence: Rising confidence in asset pricing reaching cyclical lows has led to liquidity returning to capital markets.
• Transaction Activity: The office market showed continued recovery, while retail and industrial sectors remained strong.
• Yield Trends: Yields in select markets began to decline, particularly in retail and industrial, with the national prime retail yield falling to 5.6% in Q4 2025.
• REITs Participation: A-REITs became net buyers for the first time since Q3 2022, indicating a shift in investor sentiment and the return of domestic institutions.

Investment Activity Trends

• Total Investment Volumes: Rose to $51.4 billion in 2025, up 41% from 2024.
• Sector Performance:
  • Retail: Best performer with a 9.2% total return in 2025 and 1.3% capital growth in Q4.
  • Industrial: Solid 1.1% capital growth in Q4, with strong demand and competition for prime assets.
  • Office: Continued recovery in Sydney and Brisbane, with capital values rising by 2.4% and 4.4% respectively, but suburban areas saw declines.
• Regional Growth: Regional and sub-regional retail assets showed significant growth, with yield reductions of 14 bps and 17 bps.
• Investor Types:
  • Institutional capital led with $3.4 billion in Q4.
  • Cross-border capital was the most active, accounting for $14.4 billion (32% of total activity).
  • REITs played a crucial role, especially in retail and office markets.

Cross-Border Investment

• Strong Demand: Cross-border investors, particularly from Asia and the US, remained net buyers in 2025.
• Major Transactions:
  • Brookfield sold Aveo to South Korea’s National Pension Service and Scape Australia for $3.85 billion.
  • US-based Greystar acquired a $1.4 billion stake in GIC’s Australian PBSA portfolio.
  • Japan’s Mitsubishi Estate purchased a 50% stake in the Harbourside mixed-use project for $1.15 billion.
• Expectations: Cross-border investment is expected to continue in 2026 as property markets recover.

Capital Growth and Yield Compression

• Yield Compression: Continued in select markets, with prime office yields in Sydney CBD tightening to 5.7%.
• Impact of Interest Rates: The RBA's 25 bps rate hike in February 2026 is expected to moderate the pace and depth of yield compression, though not derail it.
• Future Outlook: Investors should focus on assets with strong rental growth potential as income returns become more important.

Market Divergence

• Office Market: Divergent performance across cities, with CBDs showing growth and suburbs declining.
• Asset Grades: Premium and A-grade assets outperformed B-grade assets, reflecting stronger tenant demand and rental growth.
• Regional Focus: Growth in sub-regional retail and industrial markets is expected to spill over from major cities.

Economic and Policy Drivers

• Economic Growth: Real GDP growth reached 2.1% in Q3 2025, driven by improved household consumption and private investment.
• Household Incomes: Increased by around 4% in Q3 2025, supported by wage growth, lower inflation, and tax cuts.
• Inflation Concerns: Persistent inflationary pressures due to service and housing price increases, prompting RBA to hike interest rates.

Investment Strategy

• Early-Cycle Window: Still open in most markets, though pricing has risen in core areas.
• Asset Selection: Becoming increasingly important as market dispersion increases and vacancy rates remain high.
• Focus on Value-Add: Opportunities exist in markets like Melbourne, where pricing is attractive despite current challenges.

Contact Information

• Research & Consulting: Alistair Read - +61450831899 - Alistair.Read@au.knightfrank.com
• Capital Markets: Michael Kwok - +612 9036 6620 - Michael.Kwok@au.knightfrank.com
• Institutional Sales: Rob Sewell - +612 9036 6847 - Rob.Sewell@au.knightfrank.com
• Research & Consulting: Ben Burston - +61290366756 - Ben.Burston@au.knightfrank.com
• Industrial Logistics: James Templeton - +61396044724 - James.Templeton@au.knightfrank.com
• Valuation & Advisory: Al Carpenter - +61290366662 - Al.Carpenter@au.knightfrank.com