Business Insights | Australian Real Estate Investment Defies Global Headwinds in H1 2026

Few would have predicted that Australian commercial real estate investment activity would accelerate in the first half of 2026. Against a backdrop of higher interest rates and geopolitical instability, investors faced a more challenging environment than many had anticipated at the start of the year. Yet the Australian market has once again demonstrated its resilience, with transaction volumes exceeding expectations and reinforcing the country's position as a preferred destination for real estate capital.  

According to CBRE Research, investment volumes reached $19.0 billion in H1 2026, representing a 16% increase compared with the same period in 2025. The result is particularly notable given the 75-basis-point increase in interest rates and ongoing volatility in the Middle East, both of which could have dampened investor confidence. Instead, investors continued to view Australia as a relatively stable and attractive market compared with many global peers.  

Perhaps the most significant takeaway from the first half of the year was the breadth of growth across the market. Every major sector recorded higher transaction volumes than a year earlier, highlighting a recovery that extends well beyond a single asset class.  

Retail was the strongest-performing sector by volume, attracting $6.1 billion in transactions during H1 2026. The sector extended the momentum established in 2025 and delivered a further 4% year-on-year increase in investment activity. Industrial and logistics assets continued to benefit from strong investor demand, recording $5.4 billion in transactions, up 5% from the previous year.  

The office market also showed encouraging signs of renewed investor interest. Transaction volumes reached $4.2 billion, an increase of 15% year-on-year, with Sydney accounting for much of the activity. While office investment has faced scrutiny globally over recent years, the growth in Australian transactions suggests capital is selectively returning to the sector where pricing has adjusted and opportunities remain compelling.  

The strongest growth rates, however, came from the hotels and living sectors. Hotel transactions totalled $1.2 billion, rising 85% year-on-year despite the impacts of international travel disruption linked to global conflict. Meanwhile, the living sector surged 93% to reach $2.0 billion in transactions, supported by several significant aged care and land lease community deals. These results underscore growing investor interest in alternative and demographic-driven asset classes.  

While total investment activity expanded, the composition of capital entering the market shifted noticeably. Direct offshore investment into Australian real estate declined by 8% year-on-year over the past 12 months, even as overall transaction activity increased. Rather than signalling weakening confidence from overseas investors, the decline reflects a changing balance between domestic and international capital.  

Domestic institutional investors have become increasingly active in 2026 after several years in which many were net sellers due to redemption pressures. CBRE notes that repricing across most real estate sectors now appears largely complete, while diversified wholesale investors are generally underweight real estate allocations. These factors have encouraged local capital to re-engage with the market and help drive transaction activity.  

Offshore investors nevertheless remain an important source of capital. North America continued to be the dominant international contributor, with $3.5 billion invested into Australian real estate over the past 12 months. Japanese investors remained the second-largest source of capital, contributing $1.5 billion despite a modest slowdown in activity. Singaporean and Hong Kong SAR investors also increased their presence, each contributing between $1.2 billion and $1.5 billion in inflows over the same period.  

The H1 2026 results present a picture of a market that has proven more resilient than many expected. Strong transaction growth across every major sector, renewed participation from domestic institutions and continued support from offshore investors have combined to offset the challenges posed by higher borrowing costs and global uncertainty. At a time when many investors remain cautious, Australia's real estate market continues to demonstrate its capacity to attract capital and adapt to changing conditions.