As we move into the second half of 2026, Australia’s commercial property market is not moving as one. It is splitting — sharply — along lines of sector, quality, and location. For investors, business owners, and anyone with a commercial loan or planning to take one out, understanding that split is the difference between a well-timed decision and a costly one.
Here is what the data says about the commercial property market in July 2026, sector by sector, and what it means for your finance.
Show Image
The Big Picture: Divergence Defines 2026
According to KPMG’s June 2026 Commercial Property Market Update, Australia’s commercial property market is entering a phase of increasing divergence. Retail is outperforming. Industrial is stabilising on structural demand. Office is still adjusting to hybrid work and the early impact of AI on space requirements.
That divergence matters enormously for borrowers. Lenders are reading the same data. Their appetite — and the rates and LVRs they offer — reflects which sector your asset sits in and how well it is positioned within that sector.
The market is also dealing with a rate environment that has tightened considerably. The RBA holds the cash rate at 4.35% heading into its August 2026 meeting, and elevated borrowing costs are putting pressure on valuations and serviceability calculations across all asset classes. Buyers who are finance-ready and move quickly on quality assets are best placed in this environment.
Industrial and Logistics: Tight, Structural and Built for the Long Term
Industrial remains the strongest performing commercial asset class in Australia — and the one lenders most want to finance.
National industrial vacancy sits at around 3.2% nationally according to CBRE, making it one of the lowest vacancy rates for the asset class anywhere in the world. In Perth, vacancy is just 2.0% — the tightest market in the country. Sydney’s Inner West precinct has tightened to 3.8%, and Brisbane’s trade coast and southern precincts are holding firm.
The supply story supports values strongly. According to Cushman & Wakefield’s research, speculative industrial supply is set to fall 46% in 2026 and 2027, with around 900,000 sqm of planned space delayed. The reason is straightforward: rents needed to make new industrial development viable are currently 10–25% above what the market is paying. When supply cannot get built, existing stock becomes more valuable.
Cushman & Wakefield forecasts national industrial vacancy will fall from its current level toward 2.5% by the end of 2027 and 1.8% by 2030. Prime net face rental growth of 3.9% is forecast for both 2026 and 2027, with longer-term annual rental growth averaging 4.8% through to 2030.
For borrowers: Industrial is the easiest commercial finance conversation to have right now. Lenders are active, LVRs are generally competitive, and valuations are holding up against a backdrop of real comparable sales. Well-located assets with strong tenants are the most straightforward to finance. In sub-markets like Perth, Brisbane’s north precinct, and Melbourne’s South East, conditions are particularly tight and competition for stock is real.
Cold storage is emerging as a standout sub-sector. According to Knight Frank’s research, rents of $350 per sqm net are no longer unusual in this space, and demand has consistently outpaced supply.
Retail: The Comeback That Is Now Confirmed
Retail has made the most dramatic turnaround of any commercial sector over the past 18 months — and the July 2026 data confirms it is not a temporary bounce.
Retail delivered total returns of 7.3% in Q3 2025, the strongest of any commercial sector for six consecutive quarters. Transaction volumes in 2024 represented 41.1% of all commercial property transactions — well above the long-term average of 28%. In the first half of 2026, retail led all commercial sectors with $6.1 billion in transactions, up 4% year-on-year according to CBRE’s Capital Flows data.
KPMG’s June 2026 update confirms falling vacancy and solid investor demand, with cap rate compression for prime assets. Neighbourhood, super-regional and major regional centres are best positioned heading into H2 2026, supported by resilient everyday spending and constrained new supply.
The key distinction within retail is quality. Essential-service retail — supermarket-anchored centres, medical-adjacent strip retail, and needs-based neighbourhood centres — is performing strongly. Discretionary and secondary retail still faces headwinds, particularly where foot traffic has not fully recovered and lease expiry risk is near-term.
For borrowers: Lender appetite for retail has improved materially from where it was 18 months ago. A neighbourhood centre anchored by a major supermarket or medical services, with a long weighted average lease expiry, is a very fundable proposition. Strip retail with strong national tenants works well too. Secondary retail with short leases or high vacancy remains lender-selective and requires careful matching to the right finance provider.
The positive shift in retail is also showing up in valuations. Rising rents and tightening cap rates mean existing retail assets are becoming more valuable — which opens refinancing and equity release options for owners who have held quality retail through the difficult period.
Office: A Market of Two Very Different Stories
Office is the most complex part of the commercial market right now — and the part that requires the most careful thinking before you borrow.
National office vacancy sits above 10% at the headline level, but that number hides a wide variation. In Sydney’s CBD core, prime-grade offices with committed long-term tenants are commanding net rents of $900–$1,100 per sqm and attracting institutional demand. Brisbane CBD is improving, Adelaide is performing strongly, and Melbourne’s city fringe — Cremorne and Richmond — is running at vacancy below 4%.
Meanwhile, Melbourne’s CBD secondary stock sits near 19% vacancy. Docklands is stubbornly high. Secondary and tertiary office assets nationally continue to face structural headwinds as tenants consolidate into fewer, better-quality buildings. As Knight Frank’s Ben Burston put it, the gap in performance between premium assets and secondary stock will expand significantly in 2026.
What is driving this? Three things. First, tenants are still consolidating — choosing less space, but in better buildings with better amenity and transport access. Second, the new office supply pipeline has thinned dramatically, which will benefit prime assets over the next two to three years. Third, AI and hybrid work continue to reshape how businesses use office space, and the full effect is not yet clear.
For borrowers: If you are financing a prime-grade office asset with a long lease to a strong tenant in a core CBD or city-fringe precinct, the lending market is workable. If you are looking at secondary grade, older strata office, or high-vacancy assets, the lender pool is narrower and you need a specialist broker to find the right match. Valuations on secondary office are under pressure, so LVRs may be more conservative than you expect.
What Lenders Are Saying Right Now
Across all sectors, three themes are consistent in how lenders are approaching commercial property finance in July 2026.
Quality and covenant are everything. Every lender is focused on lease quality, tenant strength, and lease expiry risk. A 10-year lease to a national-brand tenant in a tightly-held precinct is fundable at competitive terms. A short lease to a single small business in a secondary location will require a much more careful approach.
Industrial leads, retail is back, office is selective. Lender appetite broadly mirrors the market. Industrial gets the widest panel of interested lenders and the most competitive terms. Retail has opened back up for quality assets. Office is workable for prime but requires specialist lender matching for anything secondary.
Serviceability is under pressure. With the cash rate at 4.35% and the August 2026 RBA meeting live, lenders are stress-testing debt serviceability carefully. They want to see clear evidence that the property can service the debt at current rates — and at rates 0.5% higher. Rental income that comfortably covers loan repayments at current rates, with room to move, makes for a strong application.
The Opportunity in H2 2026
Despite the complexity of the current environment, the fundamentals for well-prepared commercial property borrowers are solid.
Supply constraints across industrial and quality retail mean existing assets are becoming harder to replace — which supports values. Transaction volumes are strong and comparable sales are available to support valuations. Domestic buyers are more active as offshore capital has pulled back, which levels the playing field for private investors.
CBRE has flagged a substantial pipeline of commercial assets expected to come to market in H2 2026. More stock means more choice. For borrowers with finance in place and a clear view of what they want, the second half of the year should offer genuine opportunities.
The most important thing you can do right now is get your finance sorted before you need it. A pre-approved facility or a clear understanding of what you can borrow — and on what terms — puts you in a position to act quickly when the right asset appears.
Speak to a Commercial Finance Specialist
The July 2026 commercial property market rewards those who know their sector, know their numbers, and have the right finance in place. Whether you are looking at industrial, retail, office, or a specialist asset class, the right loan structure makes a material difference to your outcome.
Our team works with Australian investors, business owners, and developers across all commercial property sectors. We have access to a wide panel of lenders — banks, non-banks, and specialist financiers — and can match your asset and structure to the right finance solution.
Contact us today for a free commercial property finance consultation.
Explore your options on our website:
- Home Loans and Investment Property Loans
- Commercial Loans
- Commercial Property Loans
- Business Loans
- Commercial Loan Calculators
- Commercial Loan Interest Rates
This article is general information only and does not constitute financial or investment advice. Market data sourced from CBRE, KPMG, JLL, Cushman & Wakefield, Knight Frank, and ANZ Research. Commercial property markets are subject to change. Always seek independent financial and legal advice before making any investment or borrowing decision.