With more than 21.6 million registered vehicles and net overseas migration of approximately 300,000 people annually, Australia’s automotive services sector is delivering one of the most resilient income streams in commercial property, according to CBRE’s June 2026 Automotive Intelligence Report.

The report shows private investors are increasingly targeting tyre retailers, service centres and auto parts assets, supported by 10-year net leases, fixed annual rent increases of 3–4% and tenants backed by ASX[1]and NYSE-listed parent companies.

Yields have remained stable despite elevated interest rates, with metropolitan assets pricing between 4.14% and 5.82%, while regional markets offer up to 120 basis points of additional return.

Activity is being led by Queensland, which accounts for 44% of national transaction volume since 2024, reflecting strong population growth across South East Queensland and continued expansion of suburban, car-dependent catchments.

Jesse Lapham, Head of Private Wealth Research at CBRE, said the sector’s performance is underpinned by structural demand.

“The size of Australia’s vehicle fleet is a critical driver. As the number of vehicles continues to grow, so too does the need for consistent servicing, parts and maintenance, supporting long-term tenant demand.”

Mr Lapham said the sector also offers a rare combination of accessibility and covenant strength.

“The market is dominated by a small number of national operators backed by listed parent companies.

For investors, that provides institutional-grade tenants at price points that remain accessible to private capital, alongside long leases and built-in rental growth,” (continues below).

The report highlights strong long-term fundamentals, with Australia’s population forecast to reach 32 million by 2035, alongside an additional 2.9 million workers and rising household incomes.

“That growth is concentrated in suburban markets where car dependency is highest. As the population expands, so too does the size of the fleet, directly supporting long-term demand for servicing, parts and tyre retail,” Mr Lapham said.

Mr Lapham said shifting policy settings are also increasing investor focus on the sector.

“As residential policy headwinds redirect capital into commercial markets, we’re seeing growing competition for well-located automotive assets with long leases and strong tenant covenants.”

On electric vehicles, Mr Lapham said the transition remains supportive of the investment case.

“EVs still require regular servicing across tyres, brakes, suspension and air conditioning, and tend to wear tyres more quickly. Fleet size matters more than drivetrain mix, and that fleet continues to grow”.

For a copy of the report, contact: Jesse.Lapham@cbre.com.

Property Council Chief Executive Mike Zorbas said the current package is hurting market confidence and will put new housing and new projects at risk.

“Australia’s housing challenge is a supply challenge. The government has confirmed these changes fail the most important test – they deliver fewer homes”.

The submission sets out that the proposed tax changes come into a system already under sustained pressure, with elevated construction costs, financing constraints, tradie shortages and post approval bottlenecks against the background of confidence-sapping changes to discretionary trusts.

It warns that weakening investment conditions will directly impact project feasibility and the number of homes that get built.

“Projects don’t proceed unless they stack up. When you increase costs or reduce confidence, fewer projects get built (continues below).”

“Taxes on investment in new housing are already sky-high. Almost 40 per cent of the cost of a new home is taxes and charges across all levels of government”.

Mr Zorbas warned that layering additional uncertainty across multiple parts of the tax system risks dampening investment at precisely the time it is needed.

“The CGT and negative gearing reforms – combined with the Budget night tax hike on discretionary trusts and the retrospective foreign land CGT changes – are creating significant uncertainty across an industry that directly employs more than 1.4 million people.”

“I urge the Parliament to consider that if changes to CGT and negative gearing do proceed despite the project impacts outlined, grandfathering and the carve-out of new builds will be essential to protect market confidence and ultimately jobs.”

Australia’s latest Federal Budget may prove to be a pivotal moment for commercial property.

While much of the national conversation has centred around housing affordability and changes to residential investment settings, the flow-on implications for commercial real estate could be significant, particularly as investors reassess where capital is best deployed over the next decade.

According to Daniel Wolman, International Director and Head of Investment Sales Australia at Cushman & Wakefield, the Budget has further sharpened the relative appeal of commercial property when compared to residential investment.

“We expect to see increased investor focus on commercial assets over the medium term as the structural advantages of the sector become more pronounced.

“With residential negative gearing now restricted, commercial property continues to offer compelling fundamentals including stronger yields, longer lease profiles and the retention of tax deductibility.”

The shift is expected to attract a broader pool of private capital into the commercial market, particularly from investors traditionally weighted toward residential property.

“For many investors, this creates an opportunity to diversify into assets that can deliver more stable income streams and stronger cash flow characteristics,” Mr Wolman said.

“Commercial property has always appealed to investors seeking income resilience, but these policy settings further reinforce that positioning.”

This renewed confidence is already beginning to translate into stronger market activity across the commercial sector and Mr Wolman said the improving capital markets environment was reinforcing commercial property’s position as a compelling long-term investment vehicle.

“We’re seeing increasing amounts of capital targeting commercial assets with strong underlying fundamentals, particularly as investors look for stable income, yield resilience and long-term growth potential,” he said.

“This momentum is expected to continue as institutional and private investors reposition portfolios in response to changing tax settings and improving market conditions.”

Another major takeaway from the Budget is the continued support for new-build developments across multiple commercial asset classes.

According to data from the Australian Government Federal Budget 2026, under the current framework, developers of eligible new-build assets remain entitled to the existing 50 per cent capital gains tax discount, a carve-out expected to stimulate development activity despite broader tax reforms impacting other sectors.

The implications extend across office, retail, build-to-rent, industrial and build-to-suit developments, sectors already experiencing evolving occupier demand and growing institutional interest.

Investor appetite for prime-grade assets also continues to strengthen, with Melbourne recently recording its largest CBD retail transaction of the year with Midtown Melbourne selling for $154 million through Cushman & Wakefield, on a core cap rate of 7.0 per cent, reflecting sustained demand for high-quality assets offering secure income and attractive yields (continues below).

Mr Wolman said the depth of active capital in the market remained significant. “Across Victoria alone, our Investment Sales team is currently tracking more than 21 active underbidders and groups with in excess of $2.8 billion in capital seeking deployment into commercial assets with strong fundamentals,” he said.

“That level of capital waiting on the sidelines demonstrates the weight of investor demand still targeting quality opportunities despite broader economic uncertainty.

“The retention of the CGT discount for new-build projects provides important certainty for developers and investors alike.

“It supports the viability of new supply at a time when Australia still faces a significant shortage of modern, sustainable and fit-for-purpose commercial space across many markets” Mr Wolman said.

At the same time, the Federal Government’s commitment to a 10-year, $120 billion infrastructure investment pipeline is expected to underpin long-term property fundamentals nationally.

Historically, major infrastructure spending has acted as a catalyst for commercial property growth, supporting employment, population expansion, logistics efficiency and urban connectivity.

The scale of the latest commitments is likely to reinforce long-term demand across industrial precincts, metropolitan office markets, mixed-use developments and emerging growth corridors tied to transport and infrastructure investment. Such examples include North Sydney Metro, Victorian Suburban Rail Loop, Brisbane Olympics, to name a few.

“Infrastructure investment of this magnitude provides a strong foundation for long-term commercial property performance. It drives economic activity, improves connectivity and ultimately supports tenant demand and capital growth across multiple commercial asset classes”.

Mr Wolman went on to say that the Budget arrives at a critical time for the commercial property sector, with interest rates still climbing, geopolitical uncertainty continuing to weigh on global markets and investor confidence remaining somewhat shaken following an extended period of caution.

“Against that backdrop, the Budget provides greater clarity and a framework for capital moving forward, further reinforcing commercial real estate as a reliable and defensive asset class. While market conditions remain challenging, we anticipate geopolitical pressures will gradually ease and interest rates will begin to stabilise over the medium term, potentially moving into a more supportive environment in the back half of 2027.

“As confidence progressively returns, we expect transactional activity and investor sentiment to continue improving across the commercial property sector.”

“While challenges remain across some sectors, particularly older office stock and construction feasibility pressures, the broader policy direction appears increasingly supportive of commercial real estate investment and development.

“For investors and owners, the message from this year’s Federal Budget is becoming clearer: commercial property is likely to play an increasingly important role in Australia’s next investment cycle” he said.

Australia’s purpose-built student accommodation pipeline has climbed to 47,233 beds, though the distribution of new supply is disproportionate to the scale and location of anticipated student demand.

Student Accommodation Council Executive Director Adele Lausberg said high demand for purpose-built accommodation reflects the role it plays in housing international students and easing pressure on the broader rental market.

“When students come to Australia, they are here to study and overwhelmingly choose purpose-built student accommodation designed for their needs,” Dr Lausberg said.

“That means more students are housed in dedicated accommodation, taking pressure off the private rental market in our major cities.”

The latest Urbis Student Accommodation Benchmarks, produced in partnership with the Student Accommodation Council, shows a significant increase on last year’s pipeline of around 40,000 beds, with projects progressing across development application, approval, and construction.

“More than 14,100 beds are currently under construction, with a strong pipeline of new supply expected to come online through to 2028,” Urbis Director Alex Stuart said.

“We are seeing a very real shift in capital allocation decisions. Investors are increasingly looking outside NSW and Victoria because the settings are simpler, more stable, and ultimately more investable.”

The national development pipeline shows a widening divergence between Sydney and Perth, as policy settings related to break lease clauses under the Residential Tenancies Act in New South Wales increasingly divert investment capital to more favourable markets interstate. 

Perth is leading the country in projects progressing into construction, with 4,224 beds currently underway, reflecting strong investor confidence and supportive policy settings.

Sydney shows signs of being persistently under-supplied – despite having the largest share of international students in the country. It lags its demand share even at the development approval stage and has less than half the pipeline it needs to match demand (continues below).

Purpose-built student accommodation operates on academic cycles, with shorter stays aligned to semesters, and needs a fit-for-purpose framework so that more projects can be built.

“A student living in purpose-built student accommodation has access to everything they need – security, safety, and community, creating a foundation for student well-being and success. But the NSW break lease settings, whilst being a well-intended policy, are having unintended consequences.”

The current NSW framework limits the ability for operators to recover costs when students exit leases early, creating uncertainty in future bookings and undermining the viability of the purpose-built student accommodation sector in NSW, as reflected in the pipeline data.

“Student accommodation is different to the traditional rental market, and has intakes largely aligned with university semesters, and provides a wraparound experience catered specifically for students. Break lease settings go directly to feasibility, and Sydney desperately needs all the housing it can get.”

Brisbane is seeing decent movement into delivery, but also faces break lease RTA issues, while Adelaide continues to build momentum across the pipeline with a steady flow of projects moving through applications, approvals and construction.

Melbourne holds the largest pipeline nationally at 12,656 beds, though the majority remain in planning application and approval stages, and construction is not necessarily guaranteed. The impact of steep Land Tax charges on student accommodation beds in Victoria is a key factor delaying projects as they move from development approval to construction.

“It’s not just about how much pipeline exists. It’s about how much of that pipeline is actually investable and deliverable,” Dr Lausberg said.

“Where governments provide operational clarity, streamline planning, and support investment, projects are progressing into construction and delivering new homes for students.”

Transaction momentum has returned to Melbourne’s metro and inner-fringe office markets, with renewed investor confidence driving a noticable uplift in activity as buyers move decisively to secure deep-value income and value-add opportunities.

Transaction volumes surge as pricing reset unlocks liquidity

According to Colliers’ latest Office Middle Markets – Australian Investment Review (Q1 2026), Melbourne’s metropolitan office market recorded approximately $476 million in transactions across 19 assets in 2025, more than doubling activity from 2024 and delivering the strongest annual result in five years.

The CBD-fringe market also rebounded positively, with investment volumes rising 17 per cent year-on-year to $189 million, as the majority of deal flow occurred in the second half of the year once buyer and vendor expectations realigned. Scott Orchard, National Director, Capital Markets & Investment Services at Colliers, said, “The uplift signals growing confidence that values have bottomed.

A pricing reset has unlocked liquidity, and buyers are now underwriting opportunities with more confidence.

Last year in metro and inner-fringe Melbourne there was a shift from opportunistic to competitive buyer behavior for well-located assets with an income bridge and that offer repositioning or refurbishment upside.”

Developers and value-add buyers re-enter the market

Developers and value-add investors were the most active buyer cohort across metropolitan Melbourne throughout 2025, accounting for close to 40 per cent of all transactions.

Much of the stock brought to market was characterised by shorter WALEs, leasing risk or vacant possession, conditions that have proven particularly attractive for buyers seeking to reposition assets early in the next cycle.

Ben Baines, Director | Investment Services at Colliers, commented, “Melbourne is following a similar trajectory to Sydney twelve months ago, with developers and value-add investors are stepping in early, targeting assets they can actively improve.

“The pricing dislocation over the past two years has created compelling entry points, particularly outside the core CBD,” he added.

Recent deals highlight renewed confidence

A series of transactions over the past year underscore the resurgence of confidence across Melbourne’s metro and CBD fringe markets (continues below).

In September 2025, 417 St Kilda Road (pictured, top) transacted for $86 million, highlighting sustained appetite for large, institutional-grade fringe assets.

Owner-occupiers have also been active, with the sale of 23–31 Lincoln Square South, Carlton (pictured, top, right) for $19.7 million reflecting groups taking advantage of vacant possession conditions.

Metropolitan activity remained equally robust, with 91–99 Railway Road in Blackburn selling for $54.35 million late last year and Mai Capital acquiring 347–351 Burwood Highway in Forest Hill for $36.6 million, demonstrating deep demand across middle-ring suburban markets.

Local capital drives inner-fringe recovery

Domestic private capital played a leading role in the CBD fringe recovery during 2025, with high-net-worth investors and family offices accounting for more than half of total transaction volumes.

These buyers have increasingly targeted counter-cyclical opportunities, accepting softer near-term income in exchange for long-term upside as vacancy stabilises and the forecast new supply pipeline diminishes.

“Local capital understands these precincts intimately,” Mr Orchard said. “Buyers are backing locations with strong long-term fundamentals, in activity centres on top of public transport, near retail, wellness and lifestyle infrastructure, and they’re prepared to look through current uncertainty and take a medium to long term view as markets normalise.”

Outlook: steady activity expected through the remainder of 2026

Looking ahead, Colliers expects transaction conditions across Melbourne’s metro and inner-fringe office markets to remain constructive through the remainder of 2026.

Buyer depth remains improved on previous years, new supply is limited, and investors are increasingly differentiating between high-quality assets and secondary stock.

While interest rates are expected to remain higher for longer, much of this risk is now reflected in pricing, with competitive tension returning for assets that can be repositioned efficiently or deliver secure income.

A link to the report is here.

Australia’s healthcare leasing market is emerging as one of the most resilient and tightly held real estate sectors, underpinned by strong population growth, rising healthcare utilisation and a shortage of new, fit-for-purpose medical facilities.

CBRE found that tenant demand across medical, allied health and specialist operators continues to deepen. However, escalating construction costs, extended planning timeframes and tighter funding conditions have materially reduced the number of new healthcare developments commencing construction nationwide.

As a result, projects that achieve sufficient pre-commitment and progress through to delivery are being met with heightened tenant and investor demand.

“Pre-commitment has become a defining factor in today’s healthcare development cycle,” said Kai Wang, Senior Negotiator at CBRE.

“Operators are making earlier leasing decisions to secure space within new facilities, particularly where projects are aligned with population growth, transport infrastructure and established health precincts.

“Construction costs have escalated sharply since 2020, while higher interest rates and more conservative lender requirements have forced many proposed projects back to the drawing board. This has intensified competition for high-quality new buildings, particularly within established and emerging health precincts anchored by major hospitals.”

One example is the seven hectare Epping Health Hub (artist’s impression, top) in Melbourne’s north. Construction commenced in March 2026 after surpassing a 35 per cent pre-commitment threshold, securing anchor tenants Icon Cancer Centre and Lumus Imaging alongside a mix of GP and specialist operators.

“Healthcare assets are benefitting from a fundamental supply-demand imbalance,” said Sandro Peluso, National Director, Australian Healthcare & Social Infrastructure at CBRE (continues below).

“With build costs increasing significantly in recent years and fewer projects progressing, the limited number of developments that do proceed are capturing leasing momentum much earlier in the cycle.”

Major hospital-led precincts continue to generate the strongest leasing enquiry. The New Footscray Hospital, currently under development as part of Victoria’s largest health infrastructure investment, is acting as a key catalyst for surrounding medical and allied health activity.

“Hospital precincts remain the gold standard for healthcare demand,” Mr Peluso said.

“Assets located within or adjacent to these precincts offer long-term relevance and tenancy depth that is increasingly difficult to replicate.

“We’re seeing the strongest demand for assets that provide flexible floorplates, modern building services and proximity to major transport and hospital infrastructure. Projects that meet these criteria are achieving faster lease-up and attracting stronger tenant covenants, reinforcing their appeal to both developers and long-term investors.

“With development pipelines remaining constrained, CBRE expects competition for newly delivered healthcare assets to remain elevated—particularly across Melbourne’s growth corridors and established health precincts—supporting leasing outcomes, asset values and long-term investment performance.”

Melbourne’s northern industrial corridor is entering a new stage of market evolution, with more than $515 million in large-format land transactions already exchanged or under exclusivity in 2026 specific to traditional industrial end product, according to Colliers’ latest Melbourne North Land Analysis.

The resurgence reflects a decisive shift in buyer focus toward scale, infrastructure access and long‑term relevance, rather than short‑cycle development opportunities and is marking a clear uplift on activity recorded across 2024 and 2025.

“What we’re seeing in Melbourne’s north isn’t a withdrawal of demand, but a clear re-pricing of certainty,” said Mitch Purcell, Director, Industrial & Logistics.

“Capital is targeting larger, well-located sites where scale, infrastructure alignment and long-term optionality can be secured, particularly where planning and delivery risk is more clearly defined,” he added.

Scale and certainty drive super‑lot activity

That shift is best illustrated by Yale Investments’ $275 million acquisition of O’Herns Logistics Park in Epping, the largest greenfield transaction recorded in Melbourne’s northern corridor in recent years, which will unlock close to 100 hectares of net developable land in one of the city’s fastest‑growing industrial precincts (artist’s impression of completed project, top).

Further validation of the market’s long‑term fundamentals has been seen through recent super‑lot transactions at Merrifield Business Park, where owner‑occupier acquisitions over the past 12 to 18 months have achieved underlying land rates approaching $600 per square metre.

These deals  underscore the premium now being placed on scale, connectivity and proximity to labour catchments, particularly by businesses seeking to consolidate or expand operations in Melbourne’s growth corridors.

Data centres reshape competition for land

One of the most significant structural forces emerging within Melbourne’s northern industrial  market continues to be the rapid expansion of the data centre sector, which is increasingly competing with traditional industrial users for serviced land.

In addition to the weight of capital mandated for traditional industrial land use in 2026, there has been over $930 million worth of capital transact unconditionally or enter exclusivity in 2026 (continues below).

Nick O’Brien, National Director, Industrial & Logistics, said, “demand for data centre infrastructure in Melbourne has accelerated significantly, with the sector’s footprint across the north and west expanding more than 600 per cent since 2020.”

“Land currently under data centre due diligence now represents up to one-third of future industrial land supply over the next three to five years, fundamentally reshaping availability, pricing and competition for traditional industrial users,” he added.

Owner‑occupiers provide stability at the smaller end

At the smaller end of the spectrum – specifically industrial retail lots below 3,000 square metres – Melbourne’s northern market has entered a phase of stabilisation following several years of strong capital growth.

Land values increased by a modest 3.37 per cent through 2025, while transaction volumes rose by more than 13 per cent year-on-year, signalling renewed buyer confidence.

Corey Vraca, Colliers Director, Industrial & Logistics, said, “lots under 3,000 square metres accounted for around 70 per cent of transactions, highlighting continued demand from owner‑occupiers, SMEs and private investors seeking manageable lot sizes and lower absolute price points.”

“Early activity through the first quarter of 2026 suggests the market is on track for potentially record levels of take‑up this year, particularly across Epping, Craigieburn and Mickleham,” he added.

A more complex, multi‑use northern corridor

As industrial, logistics and digital infrastructure increasingly compete for finite land supply, Colliers expects Melbourne’s northern corridor to continue evolving into a more complex, multi‑use employment and infrastructure zone.

“Melbourne’s north is no longer simply an industrial expansion story. It is becoming a strategically critical employment corridor, and the landholding decisions being made today will play a defining role in who captures value over the next decade,” Mr Purcell said.

CBRE’s Australian Healthcare & Social Infrastructure team says Australia’s commercial property market has entered a period of uncertainty, but the narrative of a broad-based decline overlooks what is actually unfolding: this is not a downturn, it’s a reset driven by a recalibration of capital. In healthcare, that distinction is critical.

The market hasn’t broken, pricing has. We’ve seen real dislocation before: the Global Financial Crisis was defined by a collapse in liquidity, and the COVID19 pandemic disrupted operations across entire sectors overnight. Today is different.

This is not a demand shock, nor a structural failure of real estate fundamentals. It’s a recalibration of capital driven by higher debt costs, global uncertainty and a repricing of risk.

Across childcare, medical and broader healthcare assets, the fundamentals remain intact and in many cases, stronger than in previous cycles. Demand continues to be underpinned by population growth, ageing demographics and the essential nature of these services. Occupancy is stable. Operators are performing. Income is holding.

What has shifted is the cost of capital and with it, investor behaviour. In our discussions with both domestic and offshore capital, the change is already clear. Capital is not exiting healthcare; it is becoming more selective, more disciplined and increasingly aggressive on the right opportunities.

Markets like this do not reward momentum, they reward conviction. We are seeing a clear divergence emerge: passive capital is waiting on the sidelines, while active capital is repositioning. That capital is not chasing yield compression; it is targeting quality on terms that were simply not available 18 to 24 months ago.

It is targeting:

• proven operators;

• sustainable rental structures and

• assets underpinned by land value and long term optionality (continues below).

Even in the current environment, well positioned healthcare assets continue to generate competitive tension, particularly where income is secure and operator quality is strong. That is a signal the market remains fundamentally sound.

Importantly, this cycle is not about timing the bottom of the market. It is about positioning ahead of the next phase. When conditions stabilise and they will competition returns quickly. And when it does, pricing adjusts just as fast.

Over the past decade, healthcare has evolved from fragmented private ownership into a core allocation for institutional and private capital. That shift is not reversing, it is accelerating. In an environment defined by uncertainty, capital is gravitating towards sectors it understands, with income it can rely on. Healthcare offers both.

The opportunity today is not in reacting to headlines, but in recognising the difference between volatility and value. This is not a downturn. It is a reset, and while the last cycle rewarded those who waited, this one will reward those who act early.

Despite headlines suggesting a broad-based downturn, what we’re seeing is a recalibration of capital. In healthcare, the fundamentals population growth, ageing demographics and essential-service demand remain compelling.

Capital isn’t exiting…it’s becoming more selective and ready to move decisively where income is secure, and operator quality is proven.

This cycle will reward those who act early rather than those who wait for perfect timing.

Sandro Peluso is CBRE Healthcare and Social Infrastructure’s national director.

Swathes of office space are set to be removed from CBDs across the country in the next five years in a move that’s been dubbed “the great withdrawal”.

Led by Sydney, it’s one of the lesser-known trends set to drive Australia’s office market recovery, according to a new CBRE research report.

CBRE Research Manager Thomas Biglands noted, “There is now reason to believe that vacancy rates in most Australian markets have reached their cyclical peaks as leasing activity gathers steam, more workers return to offices and new construction remains on the backburner. A less talked about factor has been the anticipation of significant levels of inventory withdrawals, which are likely to be well above historic levels in most CBD markets, helping to drive vacancy rates down.”

The Sydney CBD is at the forefront, with CBRE identifying 241,336 sqm of office space that could be withdrawn from the market by the end of the decade – representing 4.6% of the city’s existing office inventory.

That’s a significant shift in a city where new supply has typically far outweighed withdrawals.

Based on CBRE forecasts, new Sydney CBD supply will be down 61.2% over the next five years compared to the trailing five-year period, while withdrawals will be up 92.6%.

Some office stock is set to be permanently withdrawn as these buildings are converted or redeveloped for an alternative use such as apartments or hotels. These building are all outside the CBD Core in the city’s Midtown, Western Corridor, and Southern precincts, which have been hardest hit by a tenant flight-to-quality migration.

Temporary withdrawals are also on the cards, involving sites that are earmarked for new office towers. Given new construction can take five or more years, these withdrawals will still have a material impact on vacancy rates and rental growth, Mr Biglands said.

These building are all in either the city Core or the northern end of the Midtown precinct – the only areas of the CBD where new office development is feasible given the current construction climate.

Potential withdrawals are also included in CBRE’s figures, involving existing office properties which have mooted redevelopment plans.

Office space in these buildings is still available but the leases are either short term or include demolition clauses, with the projects not likely to move forward until later in the decade.

CBRE’s report notes that additional withdrawals are also highly likely in the coming years.

“The ongoing bifurcation between Prime and Secondary office leasing fundamentals has resulted in a significant pool of struggling lower grade assets in the more challenged precincts and submarkets across Sydney,” Mr Biglands said.

“While these properties are struggling to compete as office assets, fundamentals in other property sectors are more compelling. Market dynamics in residential, hotels, education, and data centres sectors are all much stronger than for secondary office at present.”

CBRE Office Leasing Director Chris Hanley believes the withdrawal trend will change the game for lower grade and less active Sydney CBD submarkets.

“Tenants in these lower grade assets are usually on very cost-effective terms so they’re unlikely to trade up to prime grade stock,” Mr Hanley said.

“If we look back to the last cycle, withdrawals associated with residential conversions sent B-Grade and lower A-grade rents sharply higher and this may play out again if all the withdrawals are realised.

“We are already seeing a significant uplift in enquiry across Midtown and the Western Corridor as value-seeking tenants start to seek relocation options as leases in buildings like 175 Liverpool Street and 338 Pitt Street approach expiry. Quality stock with existing fitout is moving very quickly and availability of this product is getting thin.”

CBRE’s report notes that the withdrawal of 50,000 sqm of office space equates to circa 1.0% of vacancy rate tightening – highlighting the major impact that the withdrawal trend could have.

The current CBRE base case forecast for the Sydney CBD is for the overall vacancy rate to declining from 12.8% as of year-end 2024, to 9.1% in 2032 when the next major wave of new supply is expected.

However, the vacancy rate could shrink to as low as 5.4% by 2032 if all the identified withdrawals proceed, or 7.0% taking a more conservative view that only the permanent withdrawals will proceed.

For a copy of the report, contact CBRE’s Tina Liptai at tina.liptai@cbre.com.

The Australian seniors living sector is a rapidly evolving industry driven by the aging population, government policies, and growing demand for more flexible and diverse living options for older Australians.

With the increasing number of people aged over 65, the sector has seen significant growth and transformation over recent years.

As well as highlighting recent sales and trends in the market, the latest CBRE Senior Living report explores three key segments of the sector: aged care, retirement living, and land lease communities.

1. Aged Care

Aged care in Australia provides a range of services designed to support older individuals who can no longer live independently.

The sector is essential due to the increasing number of Australians aged 65 and over.

By 2050, it is estimated that one in four Australians will be over the age of 65, placing substantial pressure on aged care services.

Increases in construction costs have also impacted the aged care sector disproportionately compared to other sectors, with additional compliance requirements seeing average development costs per bed of $400,000–$450,000.

The aged care system in Australia is a mix of government-funded services, private facilities, and not-for-profit organisations.

Aged care services range from home care packages to residential aged care facilities.

The federal government plays a critical role in funding and regulating the sector, with the Department of Health overseeing the delivery of services.

Key Trends:

• Home Care Packages: There has been a growing preference for home care services, allowing seniors to remain in their homes for as long as possible. These packages provide funding for personal care, nursing, domestic assistance, and other services, helping to delay or prevent the need for residential care.

• Residential Aged Care: The demand for residential care continues to rise, particularly as the population ages. However, the industry has faced significant challenges, such as staffing shortages, regulatory changes, and concerns about quality of care, which have been highlighted in reports such as the Aged Care Royal Commission.

• Regulatory Changes: The Aged Care Royal Commission, which concluded in 2021, resulted in a series of recommendations aimed at improving care standards, including increased funding, better staff training, and greater transparency. The implementation of these recommendations is expected to reshape the aged care landscape.

2. Retirement Living

Retirement living refers to housing options designed for older adults, typically aged 55 and above, who are generally independent but prefer the security and convenience of living in a community tailored to their needs.

Retirement villages can include independent living units, assisted living services, and community activities that promote social interaction and engagement.

In Australia, the retirement living market is highly diverse, ranging from smaller, local villages to larger, resort-style developments.

The sector has grown as more Australians choose to downsize and seek more manageable housing options as they age (continues below).

Key Trends:

• Upscale Retirement Living: Over the past decade, the demand for high-quality retirement communities has increased. These developments offer luxury amenities such as pools, gyms, and on-site healthcare, appealing to wealthier retirees looking for a comfortable lifestyle. These communities often provide a range of additional services, including health care and recreational activities, enhancing the appeal to affluent retirees.

• Aging in Place: Many retirement villages are adapting their models to accommodate residents who may need increasing levels of care over time. These villages are integrating more flexible care services, such as home care and assisted living, allowing residents to stay within the same community for longer.

• Financial Models: One key aspect of retirement living is the financial model used for the properties. Typically, residents purchase the right to live in a retirement village, often through a leasehold arrangement or a “loan for lease” structure. As the market matures, new models, such as shared equity and rent-to-buy schemes, are emerging to make retirement living more accessible to a broader range of seniors.

3. Land Lease Communities

Land lease communities are a unique form of seniors living in Australia.

These communities consist of privately owned land on which residents lease their homes.

This model allows seniors to purchase a manufactured or modular home while renting the land it sits on.

The homes in land lease communities are typically more affordable than traditional retirement homes and offer greater flexibility for the resident.

Land lease communities are becoming an increasingly popular option for retirees seeking more affordable housing, particularly as the cost of traditional retirement living options continues to rise.

These communities often provide residents with a sense of ownership, while also benefiting from the shared services and social activities typical of retirement villages.

Key Trends:

• Affordability: The affordability of land lease communities is a key factor in their growing popularity. Many retirees are drawn to these communities due to the lower upfront costs compared to buying a house or even purchasing a retirement village unit. The ongoing rental payments for the land are generally more affordable than purchasing a traditional home.

• Regional Growth: Many land lease communities are located in regional and coastal areas, attracting retirees looking to downsize and live in more relaxed, scenic environments. This trend has accelerated due to the rise of remote working and a desire to escape crowded cities.

• Sustainability and Innovation: Some land lease communities are adopting sustainable building practices and providing eco-friendly homes. With an increasing focus on environmental impact, these communities are appealing to a more eco-conscious senior demographic.

Evolving sector

The Australian seniors living sector, comprising aged care, retirement living, and land lease communities, is undergoing significant transformation.

As the population ages, the demand for housing and services tailored to older Australians will continue to grow, creating a dynamic market with evolving investment opportunities.

Recent sales and trends in each segment reveal that the sector is attracting substantial investment, signalling its long-term potential.

However, the challenges of affordability, regulatory compliance, and care standards remain important factors that will shape the future of this critical sector.

For CBRE’s Seniors Living report, contact Marcello Caspani-Muto at marcello.caspani-muto@cbre.com.au.