Interest rates have always played a pivotal role in shaping the commercial real estate in Queensland, where their influence is particularly pronounced. As the Reserve Bank of Australia (RBA) adjusts its monetary policy to respond to inflation and economic conditions, investors and property owners across the state are seeing tangible effects on asset values, buyer sentiment and market activity. Here’s how the current interest rate environment is reshaping commercial property in Queensland.
Borrowing power and buyer confidence
With recent interest rate cuts by the RBA from a peak of 4.35% to 3.6% most recently in August, there is renewed confidence in the market. Lower borrowing costs are making it easier for investors to access capital, which is driving increased demand across retail, industrial and office sectors. For commercial property in Queensland, this shift is already translating into stronger price growth and heightened competition for quality assets.
Capitalisation rates and asset valuations
Interest rates directly influence capitalisation rates, a key metric used to value commercial property. As interest rates fall, capitalisation rates tighten, leading to higher asset prices. In Queensland, recent rate cuts have begun to stabilise capitalisation rates, particularly in the retail and industrial sectors which are showing signs of resilience and recovery. This shift is contributing to renewed confidence in the Queensland property market, especially among investors seeking long-term income-producing assets.
Sector-specific impacts
The Queensland property market is looking better than it has in years thanks to recent and further anticipated cuts to interest rates. Some of the sector-specific impacts of interest rates include:
· Retail: Income returns are at their highest since 2016, with strong demand for neighbourhood centres and assets supported by everyday consumer spending, such as groceries, pharmacies and essential services. Learn more about the rise of the retail property investment market in Queensland.
· Industrial: Vacancy rates in Australia’s core CBD markets, including Brisbane, remain among the lowest globally. Demand continues to outpace supply, especially in logistics and distribution hubs.
· Office: While office spaces are still facing challenges from remote work trends and economic uncertainty, the sector is showing early signs of stabilisation with rental growth emerging in core markets.
Regional vs metro dynamics
Queensland’s regional markets – such as Toowoomba, Townsville and Rockhampton – are benefiting from internal migration and lifestyle-driven relocations. These areas are seeing increased investment activity, particularly in retail and mixed-use assets. Meanwhile, metro Brisbane and the Gold Coast continue to attract strong interest from large-scale investors, thanks to major infrastructure projects (like those for the 2032 Olympic Games) and a growing population that’s driving demand for commercial property.
Looking ahead with Kelly & Co Property
Interest rates are more than just a financial ever – they’re a signal of direction in the market for commercial real estate in Queensland. As conditions continue to shift, those with the insight and experience will be best placed to identify value and make strategic moves – that’s where Kelly & Co Property come in.
Kelly & Co Property is your trusted specialist in commercial investments in Queensland, bringing together more than 50 years of property experience to provide a highly personalised service. Whether you’re a savvy investor of commercial property in Queensland looking to reposition, acquire or grow your portfolio, we can help you achieve the best possible outcome for your commercial investment. Learn more about our commercial investment offerings.