Australia’s industrial, office sectors are top property calls this year

KEY institutional investors in Australia say that they are optimistic about the country’s property market, particularly the industrial and office sectors, amid a persistent supply crunch while foreign players continue to pump in funds.

“At the moment, what we’re seeing is chronic undersupply in nearly every sector in the last four or three years,” said Sean McMahon, chief investment officer (CIO), Charter Hall, at last week’s Private Equity Real Estate (PERE) Asia Summit 2025 in Singapore.

With A$83.4 billion (S$69.7 billion) of property funds under management (FUM), Charter Hall invests in sectors including industrial and logistics, office and retail in Australia. McMahon is particularly upbeat about the outlook for the industrial sector, projecting annual returns of up to 13 per cent for one of Charter Hall’s bigger funds.

The optimism in Australia’s property market is spurring a flurry of transactions, he added. Charter Hall raised about A$1.6 billion in the past six months, half the length of time it used to take.

Interest from global investors who see Australia as a safe haven is also brightening the appeal of its real estate market, he noted.

These include Singapore’s developers and real estate managers, such as CapitaLand Investment . The group announced last November that it will commit up to A$1 billion to grow its FUM in Australia, and that it had two new hires to drive growth there. It has more than A$9 billion of assets under management in the country across logistics, business parks, lodging and commercial assets.

Rising industrial rents

According to Frasers Logistics & Commercial Trust (FLCT), which has 36.3 per cent of its portfolio value from logistics and industrial properties in Australia, industrial prime-grade rents have been rising since late 2020.

Citing Jones Lang LaSalle figures, FLCT showed last month that annual rents in Brisbane increased by the most, by 12.9 per cent year on year in the fourth quarter of 2024. Next came Melbourne, logging a 7.5 per cent gain. While rents in Sydney rose by the smallest margin of 5.3 per cent, they remained the highest at A$217 per square metre.

FLCT’s total portfolio is worth about S$6.8 billion.

Another sector with bright prospects is office. As with key global cities where more companies are telling their employees to return to office, the trend has continued to gain momentum in Australia and could pick up further this year, CBRE said in a Feb 27 report. That is while the vacancy rate for offices commanding premium rents remains low, at 5.5 per cent.

“The return-to-office trend in Australia is close to the pre-Covid level,” noted Penny Ransom, CIO of Lendlease at the PERE conference. She added that the supply in Sydney, for instance, is tight, and new inventories could take as long as a decade to kick in as valuations are below replacement costs.

Some Singapore players have invested in the city’s office sector in the past year. These include Metro, Sim Lian and Keppel Real Estate Investment Trust.