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Home September 2026 direct property market update
October 29, 2026

September 2026 direct property market update

Economy

During the September quarter, escalating conflict in the Middle East pushed Brent crude back above US$100 per barrel1, reversing some of the relief experienced earlier in the year. Higher fuel prices increased pressure on household budgets and business costs, while supply disruptions added to economic uncertainty.

 

Against this backdrop, annual inflation in Australia increased to 4.0% in August from 3.5% in July. Underlying inflation, which reduces the influence of unusually large price movements, was unchanged at 3.6%, highlighting that price pressures extended beyond fuel costs1. With inflation persistently above its 2 – 3% target range, the RBA increased the cash rate by 25 basis points (bps) to 4.60% on 29 September – the fourth increase this year. The Board judged that renewed energy and technology cost pressures, stronger-than-expected demand, and weak productivity growth increased the risk of inflation staying elevated for longer and necessitated a tighter monetary policy position2.

Economic activity remained resilient, with GDP increasing by 0.4% in the June quarter and 2.1% over the year. Business investment was an important contributor, increasing by more than 10% over the year to June, supported by data centre and renewable energy construction3. This investment supported growth while adding to competition for workers, materials, and other resources in an economy with limited spare capacity. While investment had been robust, NAB’s September Monthly Business Survey showed businesses becoming increasingly cautious, with higher interest rates, elevated fuel costs, and global uncertainty weighing on confidence4.

The labour market continued to ease gradually. Employment increased by 39,500 in August, with growth in part-time jobs partly offset by a small decline in full-time work. Unemployment nevertheless rose to 4.6% as the number of people entering the labour force grew faster than employment5. Job vacancies also declined modestly over the three months to August, particularly in the private sector6, consistent with a gradual easing in hiring demand.

The housing downturn broadened, with prices falling across most capital cities7 and new housing lending declining noticeably. The impact on the wider economy remained limited, with strong business investment supporting growth and the RBA assessing the direct effects of falling housing wealth on spending as relatively modest3. Many mortgage borrowers retained substantial financial buffers, with the RBA’s October Financial Stability Review reporting that the median borrower held enough savings in offset and redraw accounts to cover more than a year of scheduled repayments. Fewer than 1% of borrowers were estimated to be in negative equity, while mortgage arrears remained low despite greater financial pressures among lower-income households9.

“Economic activity remained resilient, with GDP increasing by 0.4% in the June quarter and 2.1% over the year.”

Office10

It was the strongest quarter of space demand across the major CBD markets in two years, with net absorption totalling over 58,000 square metres (sqm). The main driver of the result was Melbourne CBD (~48,000 sqm), which recorded its strongest quarter of net absorption in eight years. Melbourne’s growth was relatively broad-based, with four of seven precincts recording positive net absorption including both the eastern and western ends of the city. Adelaide CBD also contributed substantially to the national result, with occupied space expanding by 1.1% (~15,000 sqm). Following four quarters of robust demand, Brisbane CBD recorded negative net absorption of ~28,000 sqm, largely due to the consolidation of a government tenant.

 

The national CBD vacancy rate decreased to 14.8%, its lowest level in over two years. Melbourne CBD’s demand-driven 1.1ppts improvement was the main driver, while Sydney, Perth, and Adelaide all continued their trend of steady tightening. Vacancy in Canberra and Brisbane CBD increased slightly, but these markets are broadly in line with their long-term average. While this quarter’s vacancy contraction was supported by limited new supply, next quarter will likely face some upwards pressure as a handful of projects are scheduled to complete.

 

 

National CBD prime net face rent growth of 1.3% was recorded over the quarter, nudging annual growth slightly higher to 5.6%. Every market recorded face rent growth, led by Brisbane CBD which has regularly been the top-performing market since 2022. Prime incentives were largely unchanged over the quarter, meaning changes in effective rents were mostly driven by headline growth rates.

 

 

 

National office transaction volume totalled nearly $3 billion over the quarter, representing the strongest third quarter since the market’s peak in 2022. Brisbane CBD recorded the strongest volume by a large margin, underpinned by the $700 million sale of 480 Queen Street, the state’s largest ever single-asset office transaction. There was also solid transaction activity across Sydney, both in the CBD and in select non-CBD markets.

Prime average equivalent yields expanded by 6.5bps in Melbourne CBD due to softening at the upper end of the yield range, typically reflecting lower-quality assets. Yields were unchanged across the other major markets.

“It was the strongest quarter of space demand across the major CBD markets in two years”

Retail10

Retail spending has remained resilient amidst ongoing cost-of-living and interest rate pressures, but the latest data print (August) did appear to show early signs of softening. Discretionary categories of Clothing and Department Stores recorded the most significant slowdowns in annual growth, but dining (restaurants, cafes, and takeaway) accelerated and remains the top-performing category. Western Australia and Queensland have been the top-performing geographies over the last month, quarter-to-date, and year, while Victoria continued to underperform.

 

Supply remains very constrained, largely limited to convenience and Large Format centres in population growth corridors. Lack of supply is supporting higher net rents across major discretionary shopping centres (Regionals), where annual growth is now at its strongest pace since 2011. Net rent growth slowed slightly across Sub-Regionals and Neighbourhoods, reflecting a broad-based moderation in growth rather than a large drag from any specific market.

Retail transaction volume totalled nearly $4.8 billion in Q3 2026, the strongest third quarter since the data series began in 2007, lifting rolling annual volume to a record high. Regional shopping centres accounted for just under $3 billion – the segment’s second-highest quarterly total on record. This was underpinned by Cbus Property’s approximately $1.3 billion acquisition of a 50% stake in each of Westfield Carindale in Brisbane and Lakeside Joondalup in Perth, as part of the wind-up of Lendlease’s Australian Prime Property Fund Retail. Neighbourhood and Large Format volumes were also elevated, with three portfolio deals dominating activity at the smaller end of town.

Average equivalent yields were unchanged across every market and centre type except Melbourne Neighbourhoods, which recorded 12.5bps of expansion.

Industrial10

Industrial occupier gross demand strengthened further over the quarter, with take-up reaching a record high of nearly 1.5 million sqm. This was underpinned by record demand from Retail & Wholesale Trade occupiers and near-record demand from Transport & Warehousing. Amazon and Australia Post were the major contributors within those industries, together accounting for nearly 40% of total take-up across several leases. From a market perspective, Sydney was the standout with record take-up of over 630,000 sqm, while leasing demand was also elevated in South-East Queensland.

Less than 300,000 sqm of supply was delivered over the quarter, representing the lowest quarterly volume since 2021, when pandemic lockdowns and resource shortages were disrupting construction. Every market recorded completions below its five-year and ten-year quarterly averages, consistent with widespread feasibility constraints and delays in construction pipelines.

Robust demand and limited new supply helped reduce the national industrial vacancy rate from 4.8% to 4.6%. Sydney recorded the largest decline (-0.4ppts) led by the Outer Central West submarket (-1.0ppts), however Perth remained the tightest market nationally with a vacancy rate below 2%.

Prime net rent growth slowed slightly, averaging 0.8% nationally over the quarter. Adelaide continued to be the top-performing market, while the pace of quarterly rent growth improved in Brisbane. Prime incentives were largely unchanged over the quarter.

Industrial transaction volume totalled nearly $4 billion, comfortably exceeding the five-year quarterly average of $2.8 billion. Activity was particularly heightened in Perth and Sydney, which recorded their second- and third-strongest quarters on record respectively. Although Perth’s result did include its second-largest transaction in dollar terms, the strong national total was supported by a record number of deals, highlighting the breadth of trading across the market.

Average prime yields were broadly unchanged, with compression of 6bps in Sydney’s Inner West and Outer Central West submarkets and expansion of 7bps in Brisbane’s Southern submarket.

Outlook

The macroeconomic outlook remains uncertain, with persistent inflation and renewed energy pressures increasing the prospect of interest rates staying higher for longer. Financial markets anticipate approximately one additional cash rate increase over the remainder of the tightening cycle11, while the RBA has indicated it will raise rates further if required. Higher borrowing costs and pressure on household budgets are likely to weigh on spending and business confidence, although ongoing investment and household financial buffers provide some support.

The sharp rise in bond yields seen globally may dampen transaction activity and place pressure on capital values. However, property income can grow over time, with rental growth helping to offset the effect of higher yields on valuations.

For existing properties, constrained development remains an important source of support. Elevated construction and financing costs continue to challenge project feasibility, limiting new supply and supporting leasing prospects for well-located assets.

Performance is therefore likely to become increasingly differentiated across sectors, markets and individual assets. Slower economic growth could temper occupier demand, while limited supply supports income growth in tighter markets. In this environment, tenant quality, lease security and the ability to grow rental income will be particularly important, alongside disciplined debt management and active asset management.

Footnotes

  1. EIA (7th October 2026)
  2. Consumer Price Index, ABS (30th September 2026)
  3. Minutes of the Monetary Policy Board Meeting, RBA (29th September 2026)
  4. National Accounts media release, ABS (2nd September 2026)
  5. Monthly Business Survey September 2026, NAB (13th October 2026)
  6. Labour Force, ABS (24th September 2026)
  7. Job Vacancies, ABS (1st October 2026)
  8. Australian housing values down for sixth straight Month in September, Cotality (1st October 2026)
  9. Financial Stability Review, RBA (Oct-26)
  10. Cromwell analysis of JLL data (Sep-26)
  11. RBA Rate Tracker, ASX (13th October 2026)

 

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.

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