Middle East conflict spills into commercial property market
The escalating Middle East conflict is beginning to flow through to Australia’s commercial property market, with higher fuel prices, disrupted shipping routes and rising construction costs reshaping conditions across the industrial and logistics sector.
While Australia remains geographically removed from the conflict, the effects are increasingly being felt among transport and distribution operators reliant on global supply chains.
Colliers said elevated fuel prices were expected to place pressure on freight-linked sectors throughout 2026, although broader industrial property fundamentals remained resilient.
“Investment activity is likely to remain selective in the near term, particularly while cash-rate uncertainty persists,” said Colliers managing director of industrial and logistics Gavin Bishop.
“However, demand from core-plus investors remains strong, and for the right assets we are seeing solid depth of bidding.”
The research found that industrial property yields remained steady in the first quarter of 2026 despite global economic and geopolitical uncertainty, indicating continued investor confidence and a slower pace of reaction in property markets to financial market changes.
“Rising fuel and transport costs are increasing the value occupiers place on well-located assets close to population centres, freight corridors and end consumers,” Bishop added.
Colliers noted that leasing demand is still driven by transport and logistics operators, while constrained industrial land supply and a slowing speculative development pipeline were helping to keep vacancy rates tight by global standards.
Australia’s relative economic stability is continuing to attract both domestic and offshore capital, reinforcing its position as one of the Asia-Pacific region’s strongest industrial investment markets.
Structural demand drivers, including migration, population growth, e-commerce activity and shortages of well-located industrial land, are also reinforcing investor demand despite mounting geopolitical uncertainty.
Colliers senior manager of research Jordan Pangallo said the conflict was effectively creating a secondary inflation shock that could keep interest rates elevated for longer.
“The conflict is creating inflationary pressure through higher energy prices,” Pangallo said.
“This represents a secondary inflation shock, which may keep interest rates higher for longer and delay parts of the economic recovery.”
He added that rising development costs were likely to slow new supply, but that constrained supply conditions could ultimately support rental growth over the medium term.
“Constrained supply also supports rental fundamentals over the medium term, particularly in sectors such as industrial and logistics where demand remains closely tied to essential economic activity,” Pangallo said.
Colliers expects capital to remain active but increasingly targeted toward industrial and logistics assets with resilient income profiles and strong long-term fundamentals as global uncertainty continues through 2026.
