From an inner-city restaurant to a regional medical practice or even a manufacturing facility tucked away in an industrial estate, every business needs a place to call home.
While much has been made of the dip in the residential property market following the 2026 federal budget, recent signs suggest commercial activity has remained relatively resilient, although conditions vary across sectors.
In a broad sense, the value of new loan commitments for the purchase of property rose 18.9 per cent in seasonally adjusted terms to $27.2 billion, according to the latest Lending Indicators release from the Australian Bureau of Statistics (ABS) for the June 2026 quarter.
Meanwhile, business finance for the construction of new property was broadly flat year-on-year, falling 0.2 per cent in seasonally adjusted terms to $12.5 billion.
Despite this apparent resilience in lending activity, major lender National Australia Bank (NAB) noted a slight easing in its most recent Commercial Property Index for the three months to June 2026, albeit from elevated levels.
“The fall was more pronounced in the office sector, with survey participants highlighting current weakness in capital values and vacancy rates as key contributors,” NAB says.
“Confidence levels (next 12 months and 2 years) also fell, but like current sentiment, both near‑ and longer-term levels remain above the long‑run average.
“Against that backdrop, commencements are likely to increase in the near term. While easing, industrial still ranked highest of the commercial property sectors, with the retail sector indicating a slight improvement, and office flat.”
Broker’s view
So, what are brokers seeing on the ground?
Matthew Chik, broker at MC Finance Group, says the changing tax and investment environment post‑budget – most notably the negative gearing and capital gains tax (CGT) settings – has redirected some investor focus towards the commercial property space.
“For investors, these changes have introduced another layer of complexity when assessing the long-term return and exit strategy of a property investment,” he says.
“As a result, we are seeing more conversations around commercial property, although commercial property comes with its own risks, including vacancy, tenant concentration, liquidity and potentially higher financing costs.”
Chik also points to a marked shift in sentiment from this time last year, when businesses were expecting further rate cuts, to today’s more cautious outlook.
“Rather than committing significant capital to purchasing their own premises, some are choosing to rent and preserve their cash for the operating business,” he says.
“For certain types of commercial property, softer conditions can also create opportunities for tenants to negotiate more favourable lease terms or for businesses to secure premises that may previously have been outside their budget.”
Meanwhile, Isabella Constantinou from Simplicity Loans and Advisory says appetite remains open for quality deals, but lenders are becoming more selective, with greater emphasis on cash flow reliability, balance sheet strength, and delivery feasibility.
“Liquidity generally remains strong across the board, with many of our active funds reporting capital availability and business-as-usual investor appetite,” she says.
“What we are seeing is LVRs quietly compressing in practice for certain asset classes and locations, even where headline policy may still list higher leverage options – credit committees are leaning harder on sponsor track record, financial strength and clearly defined exit strategies.”
The next 12 months
Chik says softer market conditions could create opportunities for borrowers with strong financial positions, as well as for commercial finance brokers.
“For borrowers with strong financial positions, sufficient equity and sustainable cash flow, softer market conditions can potentially create opportunities to acquire commercial property or businesses on more attractive terms than during a stronger market,” he says.
“However, I wouldn’t describe the market as being definitively at the ‘bottom’. Nobody knows with certainty where the property cycle will ultimately bottom, and commercial property is highly segmented. An industrial property with a strong tenant and long lease is very different from a secondary office building or a retail property with high vacancy.”
Looking ahead, Constantinou says the key consideration for commercial borrowers will be certainty of execution, rather than just headline rate.
“Doing real due diligence on a lender’s liquidity and credit appetite before committing is something brokers need to keep at the forefront of conversations with borrowers,” she says.
Meanwhile, Chik says lender appetite could prove a challenge.
“Many SMEs are operating with weaker profit margins and tighter cash flow than they had one or two years ago. That makes credit assessment more difficult at exactly the time when many businesses need additional working-capital support,” he says.
“For commercial borrowers, having strong financial records, a clear explanation of their business performance and a well-structured funding proposal will become increasingly important.”
