Commercial property isn’t moving in a straight line, and Knight Frank’s 2026 outlook highlights the spaces set to outperform in 2026 as the next phase of the cycle looks very different from the past decade.
After years of ‘beds and sheds’ outperformance, the gap between sectors is narrowing. Office and retail assets are now positioned to deliver stronger income returns in 2026. Driven by growing tenant preference for well-located, higher-quality space.
At the same time, elevated construction costs have pushed economic rents to record highs. That’s making new developments harder to justify – tightening supply and supporting performance for existing buildings.
Demand isn’t uniform
Vacancy rates may look elevated on paper, but Knight Frank notes that prime office precincts in Sydney, Melbourne and Brisbane are already showing rental growth. Tenants are upgrading into better-quality space, creating a two-speed market where premium assets outperform while secondary stock struggles.
What this could mean for borrowers in 2026
With supply pipelines shrinking and income performance improving in key precincts, lenders are showing interest in sectors demonstrating stability and recoverability. Deals backed by strong tenant profiles or tightening local markets may attract better terms as confidence builds.
Next steps for commercial property investors
If you’re considering refinancing, acquiring, or repositioning assets in 2026, now is the time to assess your portfolio. Contact Us and I can help you review your current loans, explore financing options, and identify opportunities where lenders are most receptive. We help position your investments for the next phase of the cycle.