Since residential investment rules got a budget night overhaul in May, the commercial sector has come into sharp focus.
Unlike residential real estate, the commercial property landscape is a vast and varied playing field with a very different playbook.
The federal government has moved to restrict negative gearing perks, will change capital gains tax calculations, and has halted new self-managed super fund borrowing arrangements – all for existing residential property. But newly constructed residential property and commercial assets will continue on under the previous perks.
The Albanese government has made sweeping reforms to SMSF borrowing arrangements. Picture: NCA NewsWire
Experts are warning that investors, who are tempted to turn to commercial property, should familiarise themselves with nuances between industrial, retail and office markets, learn to understand lease fine print, and surround themselves with an experienced team.
The economist: Look at the numbers
Anne Flaherty, senior economist at realcommercial.com.au, says industrial property has proven be the strongest-performing major commercial sector by yield movement. In the year to March, industrial yields fell in every Australian capital city; a sign that investor demand and property values have strengthened relative to rental income.
Beyond the data, industrial property has also dominated investor interest this year. Of the top 10 most-viewed properties on realcommercial.com.au for the first six months of 2026, five were industrial.
Flaherty added that while commercial property can look attractive to investors seeking income, there is a steep learning curve.
realcommercial.com.au senior economist Anne Flaherty. Picture: Supplied
“One of the biggest differences is that we often think about the value of commercial assets in terms of the yield they produce,” she explaines.
“With residential, we look at the median price of a similar property in a given area. Whereas, with commercial it’s about; who’s the tenant? What rent are they paying? How much longer is on the lease? “You’re not just thinking about what do I want to spend on the asset, you’ve got to think about how much return you’ll get on the amount spent? There’s a lot for people to wrap their heads around.”
The buyer’s agent: Keep your first deal boring
Rob Martin, commercial buyer’s agent and co-founder of Hunter Farmer said he has a simple philosophy for first-time investors.
Hunter Farmer co-founder, Rob Martin. Picture: Hunter Farmer
“There’s no easy commercial investment, but there are simple ones, and simple is what a first-timer should be chasing,” he says.
“Start with something you can actually picture being used. For most people that’s a small industrial unit or warehouse in an established estate with decent motorway access. Four walls, a concrete floor and a roller door. The simplest path in is a single tenant on a standard lease, on a single title, at a price point you could afford to carry vacant for six months. If you cannot fund that vacancy, you are not ready,” he adds.
Unlike with residential, Mr Martin prefers a strata for a first commercial purchase. “A large chunk of the ongoing cost, the roof being the obvious one, is built into the body corporate, and the tenant pays those levies,” he says.
Industrial units and warehouses are recommended for first-time commercial investors Picture: Supplied
Martin suggested new commercial investors avoid specialised fit-outs, single-industry towns and marketing that focuses too highly on yield.
“Be very careful with ‘over rent’, where the sitting tenant pays well above market. You’re buying income that disappears at expiry, and the valuation goes with it. Also be wary of a long lease attached to a weak covenant. A 15-year term means nothing if the tenant cannot trade through year three.”
And when it comes to weighing up tenant versus property, Martin said bricks and mortar should win out every time.
“A good tenant in a poor building is a temporary result. Buy quality first and the yield will follow, because a good building in a good location sits vacant less often and re-lets faster,” he says, adding that a strong, trusted team of licensed experts to help with the legwork is also vital. “I’ve been involved in well over 2000 commercial transactions and I still see new due diligence items come up.”
The broker: Beef up your deposit
Mortgage Choice broker Bhav Jaswal agrees that the asset class presents more diversity than residential.
“Commercial properties are very specialised. It’s a different ball game altogether. I’ve never done a commercial deal that is same to the one before,” she says.
According to Ms Jaswal, the biggest surprise to unfamiliar investors is the size of the deposit required when buying commercial property.
“Banks regard commercial property as far riskier than residential so they will not put themselves in a position to give you 80 or 90%. With commercial deposits it’s more often like 30 to 40% with most lenders.”
Mortgage Choice broker, Bhav Jaswal. Picture: Mortgage Choice
For a first purchase, Ms Jaswal said a small, tenanted retail property in an up and coming area can be the most straightforward path to finance approval.
She added that the hidden costs associated with buying commercial property can also catch buyers out if they haven’t done their due diligence.
“Keep in mind that the valuation isn’t covered as it would be with a residential valuation. It’s an out-of-pocket expense that can cost thousands. And if you get rejected, that money is not coming back. It’s all part of the investment,” she explains.
Ultimately, Ms Jaswal said potential investors should discuss all their options with their broker and devise an investment strategy that works with their long-term financial goals.