The current shortage of new build commercial assets available for investment through 2025 in Australia is a result of several intersecting economic, regulatory, and market-driven factors.
1. Prolonged Construction Pipeline Disruptions
Since the COVID-19 pandemic, Australia’s commercial construction sector has faced persistent labour shortages, materials supply constraints, and cost blowouts. These challenges have delayed the delivery of new projects well beyond initial timelines, creating a backlog that is still being worked through in 2025. According to recent reports by CBRE and JLL, many developments originally scheduled for completion in 2023–2024 have been pushed to 2026 or later, tightening current availability.
2. Escalating Construction and Financing Costs
Construction input costs have increased dramatically due to inflationary pressures, global supply chain disruptions, and sustained demand. Simultaneously, higher interest rates and tightening credit conditions have led to financing challenges for developers, discouraging speculative development and limiting the number of new commercial projects commencing. This has created a supply gap that institutional and private investors are now experiencing. This is particularly impacting the industrial construction space.
3. Planning and Zoning Delays
Inflexible planning systems and lengthy council approval processes have further slowed development pipelines. In key metro markets like Sydney, Melbourne, and Brisbane, industrial and mixed-use zoned land is in short supply and often subject to complex rezoning requirements, particularly for high-value commercial use. These regulatory delays contribute significantly to the supply shortage.
4. Limited Availability of Prime Land
Metropolitan areas are facing a scarcity of serviced, well-located land parcels suitable for commercial development. For example, CBRE’s 2024 Sydney Industrial Market Outlook highlighted a forecast deficit of 91–319 hectares of industrial land through 2030, a trend echoed across Australia’s major commercial hubs. This constrains developers' ability to bring new stock to market, despite strong demand.
5. Risk-Averse Development Strategy
Amid ongoing market uncertainty, many developers have become more risk-averse, favouring build-to-suit or pre-committed developments over speculative builds. With many institutional-grade tenants consolidating or downsizing due to changing workplace habits, developers are hesitant to bring uncommitted assets to market, limiting the pool of investable properties for prospective buyers.
6. Capital Repricing and Yield Compression
The repricing of commercial assets following interest rate increases has created a mismatch between seller expectations and buyer risk appetite. Many high-quality assets are being withheld from market until values stabilise, contributing to an inventory shortage. Investors looking for yield certainty are finding it harder to identify value-aligned opportunities in a recalibrating market.
7. Surge in Pre-Commitments and Institutional Demand
A significant proportion of newly built commercial properties, particularly in the logistics and industrial sectors, are being pre-committed by major tenants and institutional buyers. This means a large share of the limited new supply is effectively off-market by the time it reaches completion, making it inaccessible to most private or independent investors.
8. Population and E-Commerce Growth Outpacing Supply
Population growth, consumer demand shifts, and the continued rise of e-commerce have outpaced new development, particularly in the warehousing, last-mile logistics, and medical-commercial sectors. As demand surges and supply stagnates, the market is becoming increasingly competitive for quality, income-generating commercial assets.
9. Long-Term Infrastructure Disruption
Major infrastructure projects across NSW and Victoria, while beneficial in the long term, are temporarily disrupting access to land and slowing the approval of commercial zones. Projects such as Sydney Metro West and Melbourne’s Suburban Rail Loop have absorbed significant government focus and funding, pushing commercial development approvals to the sidelines.
10. Shift in Investor Behaviour Towards Defensive Assets
Investors are increasingly favouring secure, long-leased assets, such as healthcare facilities, childcare centres, and essential services tenancies, as a hedge against economic volatility. The rising demand for these defensive asset classes has depleted availability and pushed prices upward, narrowing options for yield-seeking investors.
Article Written By: Grant Bingham
