Australian industrial property continues to lead commercial real estate performance, but artificial intelligence is poised to fundamentally transform which assets remain competitive, according to Ray White. Industrial property delivered total returns of 8.6 per cent in December 2025, with capital growth of 4.1 per cent, the strongest of any major asset class. 

"Industrial was Australia's most-traded asset class in 2025, with $29.58 billion changing hands across the year, up 44.9 per cent from 2024, accounting for 36.8 per cent of all national commercial property activity," Ray White said. 

Average transaction sizes have grown to $6.01 million as buyers recognise existing stock carries genuine scarcity value, with Brisbane nearly doubling its volumes to $7.84 billion while Sydney remained the dominant market. 

"The depth and consistency of this activity, drawing institutional capital from Canada, Singapore and the United States alongside domestic super funds and REITs, reflects a market that global investors continue to regard as fundamentally undersupplied," Ray White said. 

AI driving operational transformation 

Ray White said artificial intelligence is rapidly moving from a back-office tool to the engine room of modern warehouse and logistics operations. "Automated storage and retrieval systems, autonomous mobile robots and AI-powered inventory management are becoming standard fitout in the most sought-after facilities globally," Ray White said. 

The warehouse automation market in the United States is projected to more than double from US$25 billion in 2024 to over US$54 billion by 2029, with Amazon targeting 30 to 40 per cent automated order fulfilment by 2030. "Australia is well positioned to benefit from these trends. The country's persistent labour cost challenges and the concentration of e-commerce and logistics activity along major metropolitan fringe corridors create the same economic incentives for automation," Ray White said. The transport, postal and warehousing sector recorded 5.1 per cent business growth in the year to June 2025, among the fastest growing industries in the country. 

Supply constraints intensify pressure 

The NSW Government's Employment Lands Development Monitor reveals the severity of supply constraints in Sydney. "Of the 20,210 hectares of zoned employment land across Greater Sydney, just 631 hectares of undeveloped land has access to water and sewer connections, representing less than nine per cent of all undeveloped stock," Ray White said. 

Almost all of this sits in Western Sydney, concentrated around the Aerotropolis precinct. "For the vast majority of established Sydney industrial markets, developable land is effectively exhausted. As the logistics industry moves toward AI-driven automation that demands larger, more technically specified facilities, the land capable of accommodating those buildings is further from the city than ever," Ray White said. 

New specifications creating market divide 

AI-enabled automation systems require substantially greater power capacity than conventional warehousing, along with high-bandwidth data infrastructure, enhanced temperature control and redundant power supply. "Assets that could meet these requirements will likely command premium rents and attract the strongest tenants. Those that cannot face growing obsolescence pressure," Ray White said. 

Ray White said the relationship between AI and overall demand for industrial space is complex, with smarter supply chains driving e-commerce growth while efficient inventory management could reduce total footprint requirements. "The net effect on aggregate demand is uncertain, but we're seeing movement toward well-specified, technology-capable assets in locations with strong logistics connectivity, and away from ageing secondary stock," Ray White said. 

"For investors, the near-term picture for industrial property remains among the most attractive in the commercial sector, but the medium-term opportunity lies in understanding which assets are positioned to meet tomorrow's occupier requirements." 

Commercial property markets have returned to positive capital growth after two years of adjustment, with national all-property returns reaching 7.4 per cent for the quarter ending December 2025. Ray White Group, Head of Research, Vanessa Rader said the return of positive capital growth at 2.0 per cent marks a shift from the correction phase that dominated recent years. "The December 2025 data represents more than incremental improvement, it marks the transition from yield adjustment to capital growth," Ms Rader said. 

Retail sector leads market recovery 

The retail sector continues its leadership position, delivering total returns of 9.2 per cent driven by capital growth of 3.0 per cent alongside income returns of 6.0 per cent. Sub-regional centres lead the sector at 10.9 per cent total returns with capital growth of 3.9 per cent, while regional centres recorded 10.5 per cent returns. "The consistency of performance across all retail subcategories indicates the sector's structural recovery is broad-based rather than concentrated in specific property types," Ms Rader said. 

Industrial maintains strong performance 

Industrial assets recorded total returns of 8.6 per cent, with capital growth strengthening to 4.1 per cent alongside income returns of 4.3 per cent. "Queensland industrial led with total returns of 10.8 per cent and capital growth of 5.7 per cent, driven by population influx and expanding logistics requirements," Ms Rader said. "Western Australia industrial posted exceptional returns of 10.0 per cent with capital growth of 4.2 per cent, reflecting resource sector strength and supply constraints that continue to attract east coast investors." 

Office markets show regional variations 

Office markets remain under pressure from structural challenges, though notable regional variations reveal how fundamentals are driving dramatically different outcomes, Ms Rader said. 

Total returns reached 5.9 per cent nationally, but capital growth remained subdued at just 0.4 per cent. "Brisbane CBD office delivered the strongest performance with total returns of 10.6 per cent, driven by capital growth of 4.4 per cent," Ms Rader said. "The combination of vacancy below 11 per cent, pre-committed Olympic infrastructure activity, and limited new supply continues to support valuations in the Queensland capital." 

She said Melbourne CBD office remains the notable underperformer with total returns of just 3.8 per cent and capital growth declining by 1.6 per cent. "Melbourne represents the clearest example of how vacancy and oversupply dynamics directly impact capital values," Ms Rader said. 

Quality assets outperform 

Ms Rader said the return to positive capital growth validates the strategic positioning that many investors adopted during the downturn. "Those who acquired quality assets at expanded cap rates are now seeing both strong income yields and emerging capital growth," she said. "However, capital growth isn't returning uniformly across all assets. The data clearly demonstrates quality and positioning matter more than ever, with premium assets in strong sectors achieving meaningful capital appreciation while secondary assets in challenged sectors continue facing value pressure." 

She said that despite upward inflationary pressures on interest rates seen in 2026 potentially dampening urgency in the marketplace, capitalisation rates are likely to remain in their holding pattern. "For investors seeking to position portfolios for the next growth phase, understanding which specific markets and property types are leading capital growth will likely be critical to generating superior returns," Ms Rader said. 

Why buy?

Many businesses will require the use of a vehicle for their daily operations. One of the first questions a business owner will need to ask is: Should I buy or lease the vehicle?

The main reason a business would buy a car is so that they own the asset. This has the added benefit of tax deductions that could make it an attractive option. Typically, you can claim things like fuel and repairs and maintenance for operating the vehicle.

Your interest payments and depreciation – which can be significant – can also potentially be claimed as a tax deduction. A car that is owned by you would also allow you to find better rates on insurance, which can end up saving a considerable amount of money.

Another consideration is how much you will need to initially put down to purchase the vehicle with finance. Normally, to achieve lower interest rates, a lender will want to see a percentage of the car's value as a down payment to reduce their risk. 

Why lease?

The second option for a business is to look at leasing a vehicle for the company. The main reason a business owner might consider leasing is the cost of a lease can be lower than the cost to finance a car and make repayments. However, there are other options that can help you reduce your repayments when financing a car – such as a balloon payment – that can lower your monthly costs.

When you lease a car, you never actually own the asset and are also not required to cover the ongoing costs of maintenance and servicing. However, there may be costs associated with driving more kilometres than your lease allows, which would result in additional expenses.

Typically, leasing might be cheaper on a monthly basis, but in the long run, you’ll end up paying far more while not owning the asset. It's also worth considering what the upfront costs might look like. While a lender would likely want to see a deposit put down to secure a better interest rate, there could be fees associated with leasing the car that also need to be paid upfront.

When deciding if you’d like to lease or buy, there are a host of tax considerations that you need to take into account. These should be discussed with your accountant before making any decisions. While cash flow is important to all businesses, it’s equally important to do a side-by-side analysis of leasing versus purchasing with finance to determine which option is the most cost-effective for you. With anything in finance, it’s important that you speak to the right professionals to help you make the best decision for you and your business.