The commercial sector will be the highest performer in real estate for 2025, with easing interest rates set to stimulate corporate and leisure travel budgets, according to CBRE’s capital markets experts.
Data centres, student accommodation, and retirement and senior living will be the best performers, CBRE Pacific Head of Alternatives Mark Granter said.
CBRE Pacific Head of Office James Parry agreed.
“It’s been repriced, and it looks like good value,” Mr Parry said.
“Trends from overseas are really increasing. We’re seeing large-scale transactions starting to happen there, and we anticipate that will also become the flavour here.”
CBRE’s Pacific Head of Hotels Michael Simpson says zwe are about to enter an interest rate easing cycle which will compress capitalisation rates.
“It’s going to have a stimulatory impact on corporate travel budgets, and leisure travel budgets,” Mr Simpson said.
“We’ll see cap rates going down and income going up.
“It’s the perfect storm for investors, provided that those investors get into the market and get set now.”
CBRE’s Pacific Head of Capital Advisors Paul Ryan said this year would also be marked by the level of stock available.
“The biggest challenge in 2025 is really to find product where investors are looking to deploy,” Mr Ryan.
“Some of the sectors are purpose-built student accommodation (PBSA), self-storage, data centres and manufacturing housing.”
CBRE Pacific Head of Debt & Structured Finance Andrew McCasker said the capital this year would continue to be supported by the domestic banks, which have been very strong in 2024, and this would continue in 2025 and 2026.
“The offshore and domestic banks really like the Australian market, as do the offshore pension funds, mutual funds, and superannuation funds,” Mr McCasker said.
“We’ve also got a large amount of capital coming into private credit funds out of sovereign wealth funds and the United Arab Emirates.”
The expectation is that Melbourne will continue to struggle with pricing, while Sydney will fare much better, says CBRE Pacific Head of Industrial & Logistics Chris O’Brien.
“There’s so much capital going into Sydney,” Mr O’Brien said.
“There is no longer a premium for scale.
“From a pricing perspective, anything above $100 million is going to struggle, while anything under $100 million is going to do well. Brisbane is going to move a little better this year as well.”
CBRE Head of Capital Markets in the Pacific Flint Davidson, said 2024 demonstrated early signs of a recovery led by a rebound in transaction volumes.
“This was seen across most of the sectors, with office volumes up a staggering 70 percent from the lows of 2023,” Mr Davidson said.
“Pricing didn’t follow the trend with the broader market experiencing further price softening. This resulted in sectors like retail and office experiencing peak to trough value declines of more than 30 percent.
“This was enough for the value-add and core-plus buyers to re-enter the market while the core money was slow to return.”
