Australian Commercial Property After the Reset: Valuations, Income and the Next Cycle

Australian commercial property has moved through a significant reset. Higher interest rates affected valuations across office, industrial and retail assets, while changing work patterns and rising construction costs added pressure in specific sectors. The result is a widening divide by sector, city and asset quality rather than a uniform recovery.

In this episode of the GloryHouse Podcast, Jonathan Williams, Fund Manager for Charter Hall Direct, joins Cathy Ding, Managing Partner and Financial Advisor at GloryHouse Wealth Management, to examine what has changed since the 2022–24 repricing cycle. Their discussion covers valuations, sector leadership, rental income, constrained supply, unlisted property and the role of professional management.

#### From repricing to the next phase

Jonathan describes the recent correction as one of the most substantial commercial-property repricing periods in decades. Charter Hall’s internal data placed the low point in the second half of 2024. By 30 June 2026, he observed greater valuation stability across the platform, with convenience retail and industrial property leading the early phase of the next cycle.

This assessment is not a prediction that every asset has reached its low or will appreciate. Commercial-property valuations depend on interest rates, capitalisation rates, rental assumptions, tenant conditions and transactions in the relevant market. The key point is that sector and asset quality now matter more than a single market-wide view.

Office remains more selective. Prime assets in Sydney and Brisbane, supported by strong amenity and tenant demand, have shown earlier signs of improvement. Secondary assets and less connected locations continue to face different leasing and capital requirements. Jonathan’s view is that office is recovering later than convenience retail and industrial, not that the sector is moving uniformly.

Resilient income begins with the tenant

The conversation returns repeatedly to tenant quality. Charter Hall seeks large tenants with established cash flows and balance sheets, particularly businesses that continue to require their premises through economic cycles.

Convenience retail illustrates the point. Shopping centres anchored by supermarkets, pharmacies and other non-discretionary services benefit from regular local demand. They may also sit on substantial land parcels that are difficult to replicate. For investors, the attraction is therefore not only current rent, but the combination of tenant covenant, recurring customer demand, land scarcity and long-term optionality.

Rental structures also matter. Some leases contain CPI-linked reviews, while others provide fixed annual increases. These mechanisms may support income growth, but they do not provide a complete hedge against inflation or higher borrowing costs. The detail varies by lease and fund, and should be assessed alongside debt duration, credit margins, occupancy and capital expenditure.

Industrial demand and the office-quality divide

Industrial and logistics property continues to benefit from structural demand associated with e-commerce, distribution networks and the need for modern facilities near population centres. High-quality industrial land remains difficult to assemble, while labour, materials and approval costs can limit new development.

Office property faces a more complex picture. Return-to-office patterns have improved demand in parts of the private sector, but tenants are increasingly selective. Buildings with transport access, quality amenity and efficient space may outperform secondary assets that require significant upgrades or sit in weaker locations.

This quality divide matters for both income and capital expenditure. A cheaper office building may offer a higher initial yield while requiring substantial incentives, refurbishment or leasing work. A prime asset may offer lower initial income but stronger tenant demand. Neither can be assessed from sector labels alone.

Supply constraints can shape the next phase

Rising construction costs have changed the economics of development. Skilled labour, materials, planning and design costs have increased, while approval and delivery periods have lengthened. Where the completed value of a new building does not justify its construction cost, projects are postponed or cancelled.

That creates a constrained supply pipeline. Over time, limited new supply can reduce vacancy and leasing incentives for existing high-quality assets, supporting rental growth. The effect is not immediate or guaranteed: demand, financing conditions and local market dynamics remain important. But replacement cost has become a more relevant part of the investment case across commercial property.

Listed, unlisted and direct ownership

Listed property securities offer market liquidity and transparent daily pricing, but their prices can move with equity-market sentiment as well as underlying property fundamentals. Unlisted funds are valued less frequently and are generally designed for longer holding periods. This can produce a smoother reported return profile, but it does not eliminate changes in the economic value of the assets.

Investors considering unlisted property should examine the underlying portfolio, tenant concentration, lease expiry profile, gearing, debt maturity, valuation policy, fees and withdrawal arrangements. Liquidity can be limited precisely when market conditions are difficult, so the investment horizon needs to match the fund structure.

Direct ownership provides control over a specific asset, but also concentrates risk and requires the owner to manage leasing, maintenance, financing and capital works. A professional fund may provide diversification and specialist asset management, while introducing manager dependence and an additional layer of fees and governance.

#### A multi-family office perspective

For a multi-family office, commercial property is one component of the family balance sheet. Its income and diversification potential must be weighed against illiquidity, concentration, leverage and long-term capital needs.

The appropriate structure will differ between families. Some may prefer a diversified managed fund; others may have the expertise and capacity to own assets directly. The decision should also be coordinated with independent legal and tax advice, particularly where property income, ownership structures and succession are involved.

The practical conclusion is to begin with portfolio purpose. Families should understand what role the allocation is intended to play, how long the capital can remain invested, what risks sit beneath the reported yield and who is responsible for managing the asset through the next cycle.

About the guest

Jonathan Williams is Fund Manager for Charter Hall Direct and the Charter Hall Direct Office Fund. He is responsible for strategy execution, portfolio construction, capital and asset management, transaction assessment and investment performance. Jonathan has more than 15 years of commercial real estate experience across Australia and North America.

About Charter Hall

Charter Hall is an Australian integrated property investment and funds-management group with more than 35 years of experience. At 30 June 2026, the group reported $94.3 billion of funds under management, including approximately $76 billion of real estate funds under management, across office, industrial and logistics, retail and social infrastructure. Figures are time-specific and should be checked again immediately before publication.

About the GloryHouse Podcast

The GloryHouse Podcast brings investors, business leaders and specialist advisers into focused conversations about the decisions that shape family wealth. Hosted by members of the GloryHouse team, the series considers investment alongside governance, succession, global mobility and long-term stewardship through a multi-family office lens.