The Australian commercial real estate sector has started to stabilise, following five consecutive quarters of decline, a new report shows.
Latest numbers from the Property Council of Australia/MSCI Annual Property Index, show total returns improved from the lowest point in Q2 last year, of -2.0% to +1.4% in Q1 2025 at the all-property level.
This growth was pushed along by a steady income return of 1.3% and a marginal 0.1% uptick in capital values, which was the first positive quarterly capital growth since half way through 2022.
Retail and industrial sub-sectors are leading the charge for this recovery effort, with retail landing a total return of 1.6% for Q1 this year, an income return of 1.4% and capital growth of 0.1%.
Retail capital values also went up from Q3 2024 onward and the industrial sector has remained strong too, delivering four consecutive quarters of positive total returns since Q2 last year.
However, office real estate is still at the bottom of the pile, despite showing its first positive total return in Q1 this year at 1.4%.
This was the first upward tick since Q1 of 2023, but came after a capital value decline of 21.8% since the start of the downward trend.
“The broad-based improvement in Q1 2025, particularly in retail and industrial, supports the thesis that the Australian commercial property market is entering a stabilisation phase", writes the Property Council.
