Investor interest in Australia’s commercial property sector is expected to rise following recent tax changes introduced in the federal budget, according to the latest quarterly commercial property update from REA Group. The market experienced a subdued start to 2026 after rebounding in 2025, buoyed by three interest rate reductions that improved borrowing conditions and investor confidence.

The report highlights that commercial retail property now benefits from full negative gearing, a change that could enhance its appeal relative to other investment options. Despite this, overall buy and lease searches have softened so far this year amid persistently higher interest rates and weakening business confidence.

New commercial property listings showed a modest increase in the first quarter of 2026 compared with the same period last year, with new for-sale listings rising by 2 percent and new for-lease listings increasing by 3 percent. This increase in supply has occurred alongside cautious investor behavior.

REA Group’s senior economist Anne Flaherty noted that higher borrowing costs and a softer economic environment are causing investors to exercise greater caution. However, ample stock levels mean there remain considerable opportunities for buyers. She emphasized that performance in the commercial property market will depend on multiple factors, including the impact of elevated interest rates, economic headwinds, and the government’s budget measures.

Sector-specific trends were notable in the first quarter, with medical and consulting property listings up 16 percent year-on-year, industrial and warehouse properties rising by 8 percent, and retail listings increasing 6 percent. Conversely, supply declined sharply in the hotel and leisure segment; for-sale listings dropped 28 percent and leasing listings fell 38 percent compared with the same period in 2025.

The report also pointed to ongoing strong demand for industrial properties, supported by the continuing growth of online retail. Rising online spending, particularly in food delivery, is underpinning the long-term fundamentals of the industrial and warehouse sectors.

Overall, while economic conditions and interest rates continue to exert downward pressure on demand, improved tax incentives for commercial retail investment and resilient performance in certain sectors may provide counterbalance and support market activity in the months ahead.