Australia commercial real estate market to reach $21.2 billion by 2034

By AI, Created 4:48 PM UTC, May 18, 2026, /AGP/ – Australia’s commercial real estate market is projected to grow from $12.7 billion in 2025 to $21.2 billion by 2034, driven by industrial strength, office-market recovery and rising sustainability requirements. The shift matters because industrial assets are expected to overtake office in investment value for the first time as vacancy stays tight and capital rotates toward quality stock.

Why it matters: - Australia’s commercial real estate market is entering a period of uneven growth, with premium assets, industrial property and ESG-compliant buildings gaining ground while weaker office stock lags. - The market is forecast to expand at a 5.74% CAGR from 2026 to 2034, reaching $21.2 billion by 2034 from $12.7 billion in 2025. - Industrial property investment values are expected to surpass office for the first time by 2026, a notable shift in capital allocation. - The transition affects investors, landlords and occupiers as vacancy, rental growth and sustainability standards reshape returns across Australia.

What happened: - IMARC Group released a market outlook on May 12, 2026 covering Australia’s commercial real estate sector. - The report says transaction volumes are expected to grow 5% to 10% in 2026. - Industrial investment volumes reached $6.7 billion in 2025. - East Coast industrial vacancy stood at 3.2%. - Perth’s industrial vacancy was 2%, the tightest level nationally. - Brisbane CBD posted the highest compound annual rental growth at 7.1% through 2030. - CoStar Group agreed in May 2025 to acquire Domain Holdings for AUD 3.0 billion. - Over 500,000 square metres of new office space is launching by 2026.

The details: - The market spans office, industrial, retail, leisure and mixed-use assets. - Industrial demand is being supported by e-commerce growth, larger warehouse and distribution needs, data centres, cold storage and advanced manufacturing. - AUKUS-related defence investment is positioned as a long-term driver for Perth, with the sector’s industrial footprint expected to double by 2034. - Office conditions are split between premium ESG-compliant assets and secondary stock. - National office vacancy was 14.6%, with Brisbane at 9.5%, Sydney at 11.6% and Melbourne at 18% in July 2024. - Brisbane, Sydney and Adelaide are showing stronger office-market recovery as the supply pipeline shrinks. - Retail recovery is broadening as conditions improve in more locations. - Sustainability has become a core filter for institutional capital, with 46% of CBD offices holding green certifications. - The Green Building Council has certified more than 1,000 projects covering 64 million square metres. - The report says 37% of Australian real estate firms are actively using AI and machine learning. - The PropTech market is valued at $5 billion and includes more than 350 active firms.

Between the lines: - The report points to a flight to quality, with capital concentrating in assets that offer lower operating risk, better tenant demand and stronger sustainability credentials. - Office and industrial markets are diverging, but the divergence is driven by fundamentals rather than broad market weakness. - Digital infrastructure is becoming more important to the sector, as shown by the Domain acquisition and faster adoption of AI tools. - The sustainability gap between certified and non-certified assets is likely to widen as institutional investors keep tightening standards.

What’s next: - Industrial vacancy is expected to remain structurally tight through 2026, with Cushman & Wakefield forecasting a peak of 3.6% in H2 2026, still below the 4% long-term equilibrium. - Office vacancy is expected to decline through 2026 to 2028 as new supply falls away. - Rental growth is expected to accelerate in prime office markets over that same period. - Industrial sub-sectors such as data centres, cold storage and advanced manufacturing are likely to attract more capital. - PropTech adoption is expected to keep expanding as firms use AI for valuation, building operations and tenant engagement.

The bottom line: - Australia’s commercial real estate market is not just growing; it is reorganizing around industrial assets, premium office stock, sustainability and digital infrastructure.