Major lender releases new report – and things are looking rosy for the commercial mortgage sector
Australia’s commercial property sector is enjoying a rare confluence of tailwinds: domestic confidence at an eight-year high, expectations of lower interest rates and growing interest from global investors seeking shelter from geopolitical volatility.
The NAB Commercial Property Index climbed to +24 in the March quarter, marking the strongest result since 2017. Confidence across most sectors and states surged, with expectations for capital and rental growth improving in nearly every corner of the market.
For Australia’s mortgage brokers, particularly those active in the commercial space, this confluence of optimism and global capital flow is shaping up as a moment of opportunity.
In a geopolitical climate increasingly defined by instability – particularly as the US heads toward a turbulent second Trump presidency – Australia is screening well to global real estate investors.
According to Kevin Thorpe, global chief economist at Cushman & Wakefield, Australia is emerging as a relative safe haven in a world where capital is actively seeking stability.
“When I look at Australia, I see a market that is a safer bet, with upside,” Thorpe told The Australian Financial Review during a visit this week. He noted that during the first Trump term, Australia’s office markets remained remarkably resilient, with capital markets booming until the onset of the pandemic.
Thorpe’s research shows global capital inflows into Asia-Pacific commercial real estate rose from 15 to nearly 25 per cent of global investment between 2016 and 2020.
As capital begins rotating from high-risk equities into safer assets, real estate – especially in stable jurisdictions like Australia – stands to benefit. The ‘liberation day’ rally in April that saw equities surge may be the first sign of this shift.
Industrial and hotels lead, Victoria lags
Among Australia’s commercial sectors, industrial and CBD hotels remain the darlings. Industrial sentiment rose to +46, supported by a tight national vacancy rate of 3.2 per cent and robust rent growth expectations of 2.4 per cent this year.
Meanwhile, CBD hotels posted a sentiment score of +50 and the highest forward confidence metrics of any sector: +83 over 12 months, and +100 over two years.
Victoria, however, remains the nation’s commercial laggard. Office vacancy sits at 15 per cent, the highest in the country, and both office and retail capital values are expected to contract next year. Still, even in VIC, the two-year outlook shows signs of recovery—office values are forecast to rebound by 2027, albeit modestly.
The REIT signal and rate-cut tailwinds
Momentum is also building in listed property.
According to JPMorgan, investors have increased their weightings to real estate investment trusts (REITs) for four consecutive months. While most funds remain underweight, the gap is narrower than at any point since tracking began in 2017. Twenty-five per cent of fund managers are now overweight REITs, the highest level since late 2023.
With a rate cut expected as soon as June, falling inflation is fuelling optimism that Australia may be entering a new phase of accommodative monetary policy.
NAB’s own economists see the cash rate dropping to 2.85 per cent by November, creating a more favourable environment for both borrowers and developers.
Debt funding conditions are already improving. The share of property professionals reporting difficulty accessing debt dropped to -4 per cent in March, down from -13 per cent the previous quarter.
Pre-commitment thresholds for securing development finance remain elevated – 55 per cent for residential, 60 per cent for commercial – but brokers report expectations are easing as investor appetite returns.
Implications for mortgage brokers
Mortgage brokers are likely to see increased commercial activity across industrial, hotel, and residential development sectors.
Clients may seek to refinance or secure new debt against appreciating assets in these categories, while developers ramp up plans to convert land-banked stock or pursue new acquisitions.
Moreover, Australia’s insulation from the potential economic fallout of a US-China trade conflict could prove advantageous.
Thorpe argues that if building materials destined for the US are redirected within the Asia-Pacific region, the resulting supply surge could create disinflationary pressure, lowering construction costs and further supporting development.
“Australia is really interesting right now,” Thorpe said. “It is going to be very resilient, given this period of uncertainty, as it has far less exposure to the trade war relative to other countries in Asia Pacific.”
In short, for brokers helping clients navigate a maturing market, Australia’s relative calm in the global storm could translate into a defining period of strategic opportunity.
