What happened
Commercial property sales jumped 21% in the first half of 2026, with industrial transaction volumes surging 27%, according to realcommercial.com.au data. However, buyer searches have dropped year-on-year every month since October 2025 following successive RBA rate hikes. Capital city office vacancy rates surpassed 10% in July, reaching 18.9% in Melbourne, while gross office yields remained tight at or below 5.5%.
Why it matters here
Yield compression in commercial property is reaching its limit as debt financing costs climb. Thin yield spreads over risk-free bond rates make office assets particularly vulnerable to write-downs, given elevated structural vacancy. While industrial assets continue to benefit from business formation, higher interest rates are expected to halt further yield tightening across all commercial property sub-sectors.
What to watch
Property Council CBD office vacancy updates and third-quarter commercial transaction reports for signs of repricing in capital city office towers.
Source
brokernews.com.au