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Home March 2026 direct property market update
April 28, 2026

March 2026 direct property market update

Economy

At the start of 2026, Australia’s economic backdrop was relatively stable, albeit finely balanced. Growth was improving, supported by a resilient labour market and strong population-driven demand, while services inflation was proving stickier than expected. The prevailing expectation was for a gradual return to target inflation, with the economy navigating a soft landing under monetary policy settings which were only slightly restrictive.

This narrative shifted materially in early March as escalating conflict in the Middle East introduced a significant external shock in the form of the largest supply disruption in the history of the global oil market1. Oil prices rose sharply, lifting near-term inflation expectations and complicating the disinflation process at a point when the domestic economy was still operating with limited spare capacity2. In that environment, the key implication was not simply higher headline inflation, but that elevated input costs would prove more persistent and diffuse into underlying price pressures.

The response was swift, with the RBA hiking the cash rate by +25bps in March to 4.10%, a back-to-back increase following February’s move. Financial markets also adjusted quickly with cash rate expectations repricing higher and long-end bond yields rising to reflect a more persistent inflation profile and increased macro uncertainty. Today, markets expect a further +61bps in cash rate hikes over the course of 20263, while the Australian 10-year Government Bond yield is approximately +29bps higher than at end-February4.

Impacts are now becoming evident across the domestic economy. Consumer confidence deteriorated sharply in April, with the Westpac-Melbourne Institute survey (published post quarter-end) highlighting renewed pressure from both higher borrowing costs and rising fuel prices5. Housing market indicators have also softened, with auction clearance rates declining and price momentum easing6, consistent with tighter borrowing capacity and weaker sentiment.

The labour market continues to provide an important anchor, with unemployment at 4.3% and participation healthy7. While forward-looking indicators such as job ads suggest hiring intentions are moderating8 conditions remain robust by historical standards.

“While forward-looking indicators such as job ads suggest hiring intentions are moderating2 conditions remain robust by historical standards.”

Office9

Net demand across the major CBD markets was mixed over the first quarter of 2026. Sydney CBD recorded the strongest increase in occupied stock on a square metre and percentage basis, with support from Brisbane CBD, Adelaide CBD, and Perth CBD. The positive outcome in these markets was outweighed by demand contraction in Melbourne CBD and Canberra, resulting in overall occupied stock declining by -0.2%. Sydney’s strong quarter was underpinned by the Western Corridor precinct, with the key occupier move being ING’s relocation from the Core precinct into One Shelley, taking up approximately 11,000 square metres over a 10-year lease. Canberra’s poor quarterly result was driven by the completion of a new development in Barton, which triggered downsizing from a government department as it moved from the Civic precinct. Positively, the majority of Canberra’s precincts recorded net demand expansion over the quarter.

 

 

The national CBD vacancy rate nudged +0.1% higher, however the composition of movements below the headline figure was relatively positive. The vacancy rate increase was nearly entirely driven by Melbourne CBD, specifically the Docklands precinct where several tenants contracted and a major development reached completion partially leased. Canberra was the only other market which saw vacancy increase (+0.1%). Conditions in Sydney CBD continued to tighten from the combination of solid demand and no supply completions, while the Brisbane, Perth, and Adelaide CBDs improved slightly. Vacancy across Prime stock remains lower than Secondary, reflecting more resilient demand.

 

 

National CBD prime net face rent growth accelerated to +2.1% for the quarter and +6.5% year-on-year. This was the strongest quarterly growth recorded since before the pandemic, and the strongest annual growth in over eight years. Strength over the quarter was broad-based, with every major market except Perth CBD – which was flat – delivering growth of at least +1.7%. Prime incentives fell in Sydney CBD and Perth CBD, supporting an acceleration of rent growth on an effective basis. While incentives were largely unchanged across the other markets, strong face rent growth ensured effective rent growth outpaced the long-term average in every market for the first time since 2018.

 

 

The first quarter of the year is typically a slow one for transaction activity and Q1 2026 was no exception. National office transaction volume was well below the pace of the previous quarter, largely due to a lack of activity across the major CBDs. A 20% stake in Sydney CBD’s Salesforce Tower changed hands, providing some pricing evidence for Premium assets. Most notable across the quarter was strong non-CBD transaction volume, which reached its highest dollar total since the market’s 2022 peak, and comprised its greatest proportion of overall transaction volume on record. This segment of the market was buoyed by several transactions across North Sydney and the Melbourne Fringe, headlined by 100 Mount Street. Prime average equivalent yields compressed slightly in Sydney CBD and Brisbane CBD while a slight expansion was recorded in Canberra.

“High-frequency indicators, including bank spending trackers, suggest a sharp reallocation towards fuel and other essentials (e.g. utilities) at the expense of discretionary categories such as eating out.”

Retail9

Household spending growth across retail-aligned categories such as groceries, clothing, restaurants, and recreation improved over January and February according to official ABS data. However, this momentum was superseded in March, when the escalation in the Middle East and associated fuel supply shock disrupted spending patterns. High-frequency indicators, including bank spending trackers, suggest a sharp reallocation towards fuel and other essentials (e.g. utilities) at the expense of discretionary categories such as eating out. Cuts to the fuel excise will relieve some of the strain on household wallets, but discretionary spending will likely continue to face pressure while non-discretionary costs remain elevated. Shopping centre vacancy rates (last reported in December) are low, which should provide a buffer against softer demand conditions.

Supply remains very constrained, largely limited to Neighbourhood and Large Format centres in population growth corridors. Lack of supply is supporting higher net rents, which grew by +1.4% over the quarter and +1.9% over the year across the core centre types (GLA-weighted basis). While rent growth accelerated across every centre type, Regionals was the top-performer. Growth across the retail sector was broad-based, with all markets delivering similar results.

 

Retail transaction volumes eased from last quarter’s elevated levels but remained above the long-term Q1 average. Large Format and Sub-Regional centres recorded the highest volumes, supported by a greater number of deals. The two headline deals of the quarter were both Sub-Regional portfolio acquisitions by Charter Hall’s Convenience Retail Fund.

Average equivalent yields were unchanged across every market and centre type.

Industrial9

Occupier take-up (gross demand) softened compared to last quarter, which was revised materially higher to be the second-strongest quarter on record. Demand came in slightly below the five-year quarterly average, but comfortably above the first quarter average of the last five years. The solid result was underpinned by Manufacturing take-up, with healthy support from smaller industrial industries such as Construction, Professional Services, and Agriculture. It was the strongest quarter for Construction demand on record, driven by several leasing deals across Melbourne.

 

From a geographical perspective, Melbourne recorded the most overall demand on an absolute basis, while Brisbane was the top-performer on a percentage basis relative to trend. Melbourne and Brisbane combined accounted for the six largest leasing deals over the quarter.

Just under 700,000 square metres of supply was delivered over the quarter. Sydney saw the most space completed, primarily driven by large projects in the Outer Central West submarket. Perth also saw an uplift in completions, underpinned by a large project in Rockingham. The future supply pipeline continues to moderate as feasibility pressures constrain project commencements.

The national industrial vacancy rate was unchanged over the quarter, with slight declines in Sydney and Melbourne offsetting increases across the smaller markets. Perth and Adelaide continue to have the lowest vacancy rates nationally.

Prime net rent growth accelerated slightly over the quarter, averaging +1.1% nationally. Adelaide was again the top-performing market, as all of its submarkets recorded quarterly growth in excess of +3%. Adelaide’s Outer South was the top-performing submarket nationally, with quarterly growth of more than +4.5%. There was solid performance at a submarket level within Sydney, Melbourne, and Brisbane, while Perth rents were unchanged. Adelaide’s outperformance widened on an effective basis as incentives remained largely unchanged, in contrast to the larger East Coast markets which generally saw incentives increase.

Industrial transaction volume softened over the quarter, primarily driven by weaker activity in Sydney and an absence of portfolio deals. In Melbourne, dollar volume was solid owing to a large development site transaction, however there was a material reduction in the number of deals completed. As highlighted last quarter, industry feedback indicates the uncertain state-level policy environment is impacting transaction activity.

Average prime yields were unchanged across every submarket.

Footnotes

  1. Oil Market Report, IEA (Mar-26)
  2. Statement on Monetary Policy, RBA (Feb-26)
  3. RBA Rate Tracker, ASX (as at market close 13th April 2026)
  4. TMBMKAU-10Y, MarketWatch (14th April 2026)
  5. Consumer Sentiment Bulletin, Westpac-Melbourne Institute (Apr-26)
  6. Economic stress scares off Australian homebuyers as auction clearances fall, The Guardian (13th April 2026)
  7. Labour Force, Australia, February 2026, ABS (Mar-26)
  8. Australian Job Ads, ANZ-Indeed (Apr-26)
  9. Cromwell analysis of JLL data (Mar-26)

 

 

Important Notice

This correspondence has been prepared by Cromwell Funds Management Limited ABN 63 114 782 777 AFSL 333214 (CFM), Cromwell Real Estate Partners Limited ABN 23 152 674 792 AFSL 418476 (CREP) and Cromwell Property Securities Limited ABN 11 079 147 809 AFSL 238052 (CPSL), all of which are wholly owned subsidiaries of Cromwell Corporation Limited ABN 44 001 056 980.  Cromwell Property Group comprises Cromwell Corporation Limited ABN 44 001 056 980 and Cromwell Diversified Property Trust ARSN 102 982 598, the responsible entity of which is CPSL.

This correspondence is not intended to provide investment or financial advice or to act as any sort of offer or disclosure document. It has been prepared without taking into account any investor’s objectives, financial situation or needs. It is provided for general information purposes only. Any potential investor should make their own independent enquiries, and talk to their professional advisers, before making investment decisions.  In making an investment decision in relation to any fund, it is important that you read the disclosure documents issued by that fund. The disclosure documents for the funds are available from www.cromwell.com.au or by calling Cromwell’s Investor Services Team on 1300 268 078.

None of CFM, CREP, CPSL or its related bodies corporate or their respective officers, employees, agents or advisors (Cromwell Property Group Members) make any representation or warranty, express or implied, as to the accuracy, completeness, timeliness or reliability of the contents of this webpage. To the maximum extent permitted by law, none of the Cromwell Property Group Members accept any liability (including, without limitation, any liability arising from fault or negligence) for any loss, damage, cost or expense whatsoever arising from the reliance on or use of this webpage or its contents or otherwise arising in connection with it.

This webpage may contain forward-looking statements, guidance, forecasts, estimates, prospects, intentions, projections or statements in relation to future matters (Forward Statements). Forward Statements can generally be identified by the use of forward looking words such as anticipate, estimates, will, should, could, may, expects, plans, forecast, target or similar expressions. Forward Statements including indications, guidance or outlook on future revenues, distributions or financial position and performance or return or growth in underlying investments are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Forward Statements are subject to known and unknown risks, uncertainties, contingencies and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied by the Forward Statements. No independent third party has reviewed the reasonableness of any such statements or assumptions. None of the Cromwell Property Group Members represent or warrant, assure or guarantee that such Forward Statements will be achieved or will prove to be correct or gives any warranty, express or implied, as to the accuracy, completeness, likelihood of achievement or reasonableness of any Forward Statement contained in this webpage. Cromwell Property Group Members assume no obligation to release updates or revisions to Forward Statements made as of the date of this webpage to reflect any changes that occur after the date of this webpage. Past performance is not a guarantee of future performance.

The distribution and use of this webpage, including any related advertisement or other offering material, in jurisdictions outside of Australia may be restricted by law and any person who resides outside Australia or who receives this webpage outside of Australia should seek advice about it and observe any applicable legal restrictions.

CFM, CREP and CPSL do not receive any fees for the general advice given in this correspondence.

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