Industrial, once the standout performer of the cycle, has found a more measured pace. Total returns of 8.5 per cent with capital growth of 3.9 per cent remain compelling in absolute terms but no longer represent the exceptional outperformance of 2021 and 2022. Queensland industrial led at 10.2 per cent, New South Wales and Western Australia both recorded returns above 9.5 per cent, while Victoria continued to trail at 5.8 per cent. Industrial estate assets delivered 9.5 per cent, warehouse 8.9 per cent and distribution 7.8 per cent. Rising vacancy in some industrial markets is beginning to introduce uncertainty, particularly for assets in secondary locations or with shorter lease profiles, and this is likely to create further variation in outcomes as the year progresses. For investors accustomed to industrial rising uniformly, this data is a prompt to interrogate individual assets more carefully: location, facility specification, lease tenure and tenant quality are all increasingly determining where a holding sits within that return range.
Office presents the most pronounced example of how average figures can mislead. Total returns of 6.3 per cent nationally with capital growth of 0.7 per cent suggest a sector slowly stabilising, but that average obscures enormous variation. Brisbane CBD is the clear standout at 11.1 per cent total returns with capital growth of 4.9 per cent, a result that placed it as the highest ranked sector in the entire databank for this quarter. Sydney CBD delivered 7.5 per cent returns with capital growth of 2.2 per cent. Melbourne CBD reached 5.3 per cent with capital growth marginally negative at 0.2 per cent. Perth CBD recorded just 3.3 per cent. Non-CBD office nationally sits at 2.7 per cent, with North Sydney recording negative total returns of minus 0.5 per cent.
At the quality end, premium CBD office delivered 7.0 per cent total returns with capital growth of 1.7 per cent, Grade A recorded 6.6 per cent, and Grade B 3.8 per cent. However within those classification individual building performance ranges immensely and that gap is unlikely to close quickly. The assets performing well share characteristics that go beyond grade designation: flexibility, genuine ESG credentials, strong amenity and tenant covenants that reflect occupier confidence in the building rather than just the address.
Looking ahead, there is reason to be measured about what the rest of 2026 delivers. Expectations surrounding further interest rate movements off the back of high inflation and ongoing economic uncertainty are likely to amplify the variation already visible in the data. Non-CBD office, secondary industrial and lower-quality retail remain exposed to any softening in occupier or investor sentiment. The headline recovery is real. But the data is increasingly telling investors that where they buy, what they buy, and the quality of what is in place at the time of acquisition will determine whether their individual experience of this market looks anything like the national average.
