What the federal budget means for commercial property investors and owners
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.
