Industrial properties drive 2024’s commercial real estate
Industrial properties led the charge in the commercial real estate market in 2024, accounting for nearly 40 per cent of the transactions.
A new Ray White report showed that industrial properties emerged as the dominant commercial sector last year, accounting for 39.6 per cent of transactions, with deals averaging $6 million.
In total, the Australian commercial real estate market saw 11,694 transactions, billing $76.64 billion – a 19.2 per cent increase from 2023.
Ray White’s head of research, Vanessa Rader, said that while the commercial real estate market entered 2024 with considerable uncertainty, the late-year activity ended 2024 strongly.
“While larger deals captured headlines in the final quarter, the market was sustained throughout the year by consistent activity from private investors and owner-occupiers in the sub-$20 million segment,” Rader said.
In 2024, industrial properties accounted for 39.6 per cent of all transactions, taking the lion’s share, while retail accounted for 19.1 per cent, office spaces for 18.6 per cent, development sites for 15.8 per cent and alternative markets for 6.9 per cent.
Rader said the industrial property market “emerged as the dominant sector”, driven by high rental growth and increased asset value.
“This market share was boosted by growing investment in specialised assets, particularly data centres commanding premium prices, alongside strong interest in cold storage and self-storage facilities,” Rader said.
“This represents significant growth from 2023’s 31.8 per cent share and marks a shift from 2022 when office was the leading sector.”
She said while returns were lower in 2024, limited supply and a shortage of development-ready lands have driven investors’ demand.
Retail properties were the second-highest asset class in the commercial market, accounting for 19.1 per cent of transactions, mostly in neighbourhoods and subregional centres.
Rader said that neighbourhoods and subregional centres have outperformed other traditional commercial investments as they attracted private investors.
“These assets have proven particularly resilient in both income and capital returns, offering a compelling mix of convenience-based retail, essential services, and food offerings that align with current consumer preferences,” Rader said.
In 2024, retail property deals sold for an average of $5.4 million, nearly doubling the average size deal of $2.9 million in 2023.
Traditionally a leader in the commercial market, the office sector accounted for 18.6 per cent of transactions in 2024, with an average sale price of $5.3 million, up from $3 million in 2023.
Rader said while vendors adjusted to new market realities, the office sector remains far from its peak when it reached an average sale of $10 million in 2022.
“While prime assets show improving occupancy, a clear quality divide has emerged, creating challenges for secondary stock,” she said.
On the other hand, while development sites only accounted for 15.8 per cent of the 2024 commercial transactions, they recorded the highest average deal values at $20 million from $12.7 million in 2023.
In total, development site transactions reached $11.8 billion.
Rader said the price increase was mostly due to industry challenges.
“High construction costs, ongoing builder insolvencies, and labour shortages continue to impact the ability for projects to ‘stack up’, particularly for high density residential,” she said.
“However, well-located sites with holding income or flexible zoning have maintained their appeal.”
The Ray White report also noted that alternative markets, such as childcare, service stations and medical facilities, have reduced in volume despite peaking private investors’ interest.
“Buyers showed greater selectivity, focusing not just on immediate cash flow but also asset longevity, tenant covenant strength, and future exit strategies,” Rader said.
“Medical assets, in particular, demonstrated resilience given their essential service nature and ageing demographic tailwinds.”
Rader said in 2025, the commercial market is poised for a more strategic investment approach, with clear distinctions between prime and secondary assets offering varied opportunities for both institutional and private investors.
“While industrial assets maintain their appeal, the retail sector’s renaissance and late-year office transactions indicate evolving market dynamics.”
“Success will likely favour those who can identify assets with strong fundamentals and clear value-add potential, particularly as financing conditions and broader economic factors continue to evolve,” Rader concluded.