Mid tier cities and regional hubs shine as investors ditch Sydney, become more selective

Then there is Perth, which continues to outperform expectations and may still be under-appreciated by east coast investors. Industrial vacancy in Perth is now among the lowest in the country, with recent figures showing the market remains severely undersupplied. That is supporting both rents and competition for well-positioned stock, particularly in major industrial precincts tied to freight, warehousing and mining-related activity. Retail conditions are more nuanced depending on the submarket, but broader leasing momentum has improved, and Perth’s tightening fundamentals have made it one of the more compelling stories in the country.

Adelaide is another market quietly moving higher on investors’ radar. Long seen as a lower-profile commercial market, Adelaide is increasingly benefiting from defence-related investment, infrastructure spending and interstate capital looking for value. Industrial precincts tied to the northern corridor are attracting attention, and the city’s yield premium to Sydney and Melbourne has been narrowing as more investors move in. Recent reporting and market commentary suggest that compression still has room to run if demand stays elevated and supply remains disciplined.

Beyond the capitals, regional Queensland remains a serious part of the conversation. Markets such as Mackay, Townsville and Rockhampton are continuing to appeal to investors willing to look past the major metros, particularly where industrial or essential retail assets are backed by national tenants and long leases. The attraction is straightforward: comparatively strong net yields and local economies still being supported by population growth, regional infrastructure and economic diversification. Regional deals are not without risk, but for investors prioritising income, they remain difficult to ignore.

For investors open to looking offshore, New Zealand is starting to re-enter the discussion, particularly Auckland and Christchurch across Rethink Group. The Reserve Bank of New Zealand held the official cash rate at 2.25% on 8 April 2026, giving investors a comparatively lower-rate backdrop than Australia and adding to the view that a recovery phase in commercial property may be building. Yields also remain higher than equivalent prime Australian assets in a number of categories, which is why some investors see trans-Tasman diversification as a way to enter an earlier-stage cycle.

Industrial and essential retail real estate remain very strong options

The bigger pattern running through all of this is that industrial and essential retail remain the standout asset classes for 2026. Investors are still paying up for assets linked to everyday demand: logistics, warehousing, supermarkets, healthcare, and convenience-based spending. In an environment where rates remain elevated and underwriting discipline matters more than it did during the cheap-money years, markets with essential services tenancy, infrastructure-led growth and limited new supply are looking the most resilient.

That does not mean every asset in every hotspot will perform equally well. But it does suggest the smart money in 2026 is becoming more selective, not less. Rather than chasing broad market exposure, investors are increasingly targeting the suburbs, corridors and cities where demand is tangible, vacancy is constrained and income has a defensive edge.

And right now, that means Brisbane and South East Queensland, Melbourne’s industrial belts, Perth’s undersupplied logistics market, Adelaide’s rising value story, selected regional Queensland centres and, for the more adventurous, a recovering New Zealand.

For investors wondering where the next wave of commercial property upside will come from, the answer may not be everywhere. It may be in the places where the fundamentals are already doing the heavy lifting.

Scott O’Neill is a prominent Australian property investor featured in AFR’s Young Rich List four years in a row. He is an entrepreneur and Founder & CEO of Rethink Group a premium property investment group, host of the top commercial property podcast “Rethink Investing’s Inside Commercial Property’’, co-author of “Rethink Property Investing’’ Australia’s number one commercial property investing book.