5 commercial property predictions for 2026
Investors wanting to do well in commercial property next year will need to take a targeted approach to asset class and location when making acquisitions.
With a question mark over how many interest rate cuts we can expect next year, investors will need to find assets with reliable income streams to drive returns.
Along with strong performance for agriculture and industrials, we can expect that niche assets, including boarding houses and cold storage, will perform well in 2026.
As 2025 draws to a close, here are five commercial property predictions for the year ahead.
Residential boarding houses
Boarding houses have moved on from the musty, tumbledown houses of days past and will see growing interest from commercial property investors in the year ahead.
Savvy property investors are building big kit homes in outer or middle rings of capital cities and in regional towns for students, recent migrants or seasonal workers who can’t afford to rent an entire home.
The houses typically have five to seven self-contained lockable bedrooms with ensuite bathrooms, and shared kitchens and living areas.
Buying a block of land and building a house is an attractive and affordable model for smaller-scale investors.
They can purchase land for, say, $400,000 and build a house for $600,000, and once it’s constructed and fully let, the property is classed as a commercial property rather than residential.
The rooms are let out for market up rents far above what the house would let for as a residence and the property’s valuation moves up to, say, $1.5 million. The developer can then draw on the equity to start on a new project.
The major banks are aware of the trend and will be increasingly open to financing these sorts of developments.
Regions to lead the way in industrials
With a national vacancy rate sitting below 3 per cent, industrial and logistics facilities are in hot demand.
But constraints on land for new facilities in capital cities are pushing developers and investors to regional hubs with access to ports and motorways, such as Wollongong and Newcastle in NSW and Geelong in Victoria. These are ideal for last-mile logistics and regional distribution.
Cheaper land in these regional centres makes for a lower entry price for investors.
Investing in logistics centres in the current market is more about participating in rent growth than cap rate compression. Net industrial rents have risen by around 4 per cent this year and should match that next year.
All up, the fundamentals underpinning the investment case for industrials mean they’re likely to remain the best defensive commercial property asset in today’s market. These are income-driven assets and perform strongly through the economic cycle and are being sorted by the tailwinds of continued e-commerce growth and the push for supply chain resilience.
Data and cold storage in high demand
The data centre story is well-known: Australia is emerging as a regional hub for cloud and AI infrastructure and demand is outpacing supply.
Institutional tenants are signing up long-term leases, transforming data centres into infrastructure-like assets with long and steady income streams.
Less well-known is the attractive investment case for cold storage logistics.
Cold storage is a high-yielding sub-sector of industrial property and pharmaceutical companies with temperature-sensitive products and food delivery networks are competing for hard-to-get space. The cost of building these facilities has deterred many developers and investors, but that also keeps supply tight and yields high on these investments.
Typically, the owners of these facilities will divide them up into smaller storage units and lease them to a range of pharmaceutical and food companies, increasing their yield.
Adaptive reuse – cheaper than building
With building costs remaining prohibitive, many investors are looking at how they can adapt existing assets instead.
We can expect to see suitable B and C class office buildings in middle ring suburbs in capital cities converted into mixed-use spaces with retail, office and residential components or even chopped up and turned into “man caves” or small industrial units. Where their floor plate is suitable, investors might try to convert them into residential apartments.
Just like cold storage and boarding houses, these assets can generate a rental premium if they are leased out as smaller spaces rather than just to one tenant.
Protein driving agriculture
Strong demand for protein from Asia will drive the values of northern Australia cattle properties.
Additionally, Australian beef exports to the US have been undented by President Donald Trump’s tariffs – Americans bought $1.6 billion worth of Australian beef in the three months to September, 26 per cent more than the year before. Now that Trump has dropped the 10 per cent tariff on Australian beef, the export trade could get a further boost.
Existing large-scale farmers and high-net-worth investors are doubling down on their landholdings to reap the benefits of operating at scale.
Cropping land will also continue to see strong demand. Wealthy investors are looking at medium to large-scale cropping operations in the Riverina in south-western NSW and in the West Australian wheat belt. Like beef land, cropping will create the most value for investors who can drive efficiencies by operating at scale.
