AI IMPACT: NATIONAL INSIGHTS AUSTRALIA
AUGUST 2026
CONTENTS
About the Study
1
Key Assumptions
2
Economic Scenarios
3
City Scenarios
4
Property Scenarios
5
Strategy Recommendations
6
Cushman & Wakefield
ABOUT THE STUDY Part 1
ABOUT THE STUDY
OBJECTIVE
WHY THIS MATTERS
To assess how artificial intelligence influences commercial real estate outcomes not through a single forecast , but through a range of plausible macroeconomic conditions
APPROACH
Macro-to-CRE linkage: Explicitly traces how AI impacts flow through the economy into real estate fundamentals
Sector differentiation: Recognizes that AI will affect CRE sectors differently, through multifaceted economic channels
Decision-oriented: Built to support strategy considerations for occupiers and investors, not just research conclusions
• Draws on emerging research from economists and technologists about the potential impacts of AI • Uses econometric models and a scenario-based framework integrated into Cushman & Wakefield’s House View forecasts; AI is one of many factors driving forecasts • Focuses on technology’s transmission to all economic drivers of CRE demand , not AI adoption or exposure alone
Cushman & Wakefield
AI IMPACT Baseline scenario: Economy
LABOUR MARKETS
STEADY GROWTH BACKDROP Real GDP averages between 2% to 2.5% over the next decade, navigating near-term energy headwinds as AI investment provides an increasingly positive uplift to growth. PRODUCTIVITY & GROWTH GAINS AI provides a modest offset to Australia's weak trend productivity growth, with adoption continuing at its current incremental pace rather than a structural step-change. Gains build gradually and arrive late in the decade.
NEAR-TERM
LONG-TERM
AI adoption becomes more widespread and while the economy continues to expand, job growth moderates slightly in line with long term trend.
Slowdown in employment in 2027 followed by robust recovery over 2028 and 2029.
INFLATION NORMALISES
CENTRAL BANKS
10-YR BONDS
CPI settles back into the RBA’s 2% to 3% target band by the end of 2027.
The Cash Rate stays elevated into 2027 before normalizing and settling between 3% and 3.5%.
10-year Gov’t bond yields begin to ease in 2027 and settle near 4%, consistent with stable capital markets.
SMARTER SERVICES, STRONGER EXPORTS AI lifts Australia's supply side through services productivity, amplified by demand for critical minerals and LNG exports supporting a regional build-out in AI infrastructure.
Cushman & Wakefield
AI IMPACT Baseline scenario: Commercial real estate
1 AI is additive to demand, not a substitute for space AI adds modestly to growth across sectors, with cumulative space demand ending the decade a little higher than the pre-AI trend implied. The effect builds slowly and is preceded by a period of recalibration. 5 Logistics & Industrial evolves gradually, but requirements rise Traditional demand remains intact, while automation, power needs, and advanced logistics drive demand for modern, flexible facilities over time.
2
4
3
Job displacement is real, but net job creation dominates AI eliminates routine roles, but most jobs evolve rather than disappear, with new businesses and higher-value work driving net employment growth.
Office demand is reshaped, not reduced Office space demand remains strong but the composition of demand changes over time as the nature of office-using employment evolves.
AI increases office bifurcation and the premium on flexibility AI accentuates the shift in demand toward high-quality, well-located, and adaptable space, as offices evolve from desks to collaboration, decision-making, and client engagement.
6
7
8
Retail benefits from AI, but becomes more polarised Stronger income growth supports spending, but a K- shaped consumer drives outperformance at the high and low ends, with pressure on mid-tier retail.
Location matters more across all sectors AI exposure varies across capital cities, widening performance gaps across geographies and assets.
Experiential and location-driven retail lead Physical, experience-based retail remains resilient, with demand concentrating in capital cities.
Cushman & Wakefield
WE MODEL 4 UNIQUE SCENARIOS
AI Adoption & Productivity
CRE Implications (High Level)
Scenario
Probability
Macro Backdrop
Labour Market
Faster growth; oil prices fall quickly as Middle East risks fade
Broad demand growth across sectors; strong rent growth and rising values
S1: Productivity-Led Expansion
Rapid AI adoption; strong productivity gains
AI largely augments labour; solid job creation
15%
Demand holds up in the near-term but sector differences emerge as AI is more widely adopted
Steady AI adoption; moderate productivity gains
GDP growth holds steady above 2% with inflation falling back below 3%
Long-run job growth remains steady after near- term dip and recovery
S2: C&W Baseline – Gradual Adoption
50%
Tighter access to credit and slow global growth triggers a short, sharp recession in 2027
Aggregate employment declines in 2027 with the unemployment rate peaking near 6%
Cyclical slowdown in demand; higher vacancy and rent pressure, followed by recovery
AI fails to meet near-term expectations; delayed productivity
S3: AI Bust – Recession
25%
Rapid AI adoption and productivity at the expense of labour substitution
Labour market headwinds are more than offset by productivity, raising GDP growth above baseline.
Structural job losses; prolonged higher unemployment
Soft demand; downside pressure on rents and values
S4: Displacement
5%
Cushman & Wakefield
AI IMPACT: REAL ESTATE DEMAND Prime net absorption 2025-2035 (sqm, ‘000s)
Change from baseline
Change from baseline
Logistics & Industrial
Forecast
Forecast
Office
2,623
-
30,407
-
S2: Baseline
S2: Baseline
2,854
+231
36,041
+5,634
S1: Upside – Expansion
S1: Upside – Expansion
S3: Downside - AI Bust
S3: Downside - AI Bust
2,588
-35
28,714
-1,693
S4: Downside – Displacement
S4: Downside – Displacement
-419
-3,042
27,817
-2,590
Across Sydney, Melbourne, Brisbane, Canberra, Perth & Adelaide CBDs
Across Sydney, Melbourne, Brisbane, Perth & Adelaide
Cushman & Wakefield
KEY ASSUMPTIONS Part 2
AI IMPACT STUDY: OUR APPROACH
Our approach was to model AI’s impact through a chain of transmissions
Real Estate markets response. This takes the assumptions made in layers 1-4, and converts them into economic inputs, which we plug in
AI adoption and deployment. This includes assumptions on how quickly firms integrate AI, and how much it actually improves productivity.
our CRE models to forecast: supply/demand/rents, etc.
LAYER 5
LAYER 2
LAYER 4
Occupier demand. This includes assumptions on business formation, corporate expansion, and consumer spending.
LAYER 1
Foundational drivers. These determine how quickly and widespread AI can be adopted. This includes assumptions on gov’t regulation, power grid capacity and data center development.
LAYER 3
Macroeconomic transmission. This translates presumed
productivity gains into economic outcomes.
Cushman & Wakefield
ECONOMIC SCENARIOS/ASSUMPTIONS
SCENARIO 2 C&W Baseline
SCENARIO 1 Productivity-Led Expansion
SCENARIO 3 AI Bust - Slowcession
SCENARIO 4 Dystopic/Displacement
50% Probability
15% Probability
25% Probability
5% Probability
• Gradual AI adoption lifts productivity growth through the next decade; GDP growth runs between 2% to 2.5%. • Labor: Strong growth trajectory is maintained before gradually slowing over forecast horizon. • Inflation falls back within the RBA’s 2% to 3% target band by 2028; gradually improving productivity contains inflation over the forecast horizon and allows the RBA to bring the Cash Rate back to neutral. • Terms of trade normalise gradually; iron ore drifts higher on steady global steel demand.
• Faster AI adoption broadly augments labour and raises productivity growth. • Real GDP growth outperforms baseline by 1 to 2 percentage points for the next 10 years. • Robust job market adds an average of 250,000 jobs annually over the next decade. • Inflation modestly lower than baseline as productivity lowers unit labour costs, allowing the RBA to remain broadly accommodative. • AI-driven global demand lifts steel-intensive construction and critical minerals; the price of iron ore holds above baseline.
• AI fails to meet elevated expectations, triggering a stock market correction and tightens global access to credit. • The correction hits in late 2026, with the bulk of the downside landing in 2027 as construction and business investment freeze and Australian growth contracts sharply. • Central banks respond with more near-term easing. • The economy stabilises in 2028 and returns to growth as monetary policy gains traction. • AI adoption continues, but at a gradual pace. • After the cyclical downturn, the patterns in the economy begin to resemble the contours laid out in our baseline scenario.
• AI adoption advances rapidly but proves more labor- substituting than augmenting. • Policyfail to implement regulatory makers guardrails as AI begins to replace human jobs. • Net employment growth sluggish; unemployment rate rises above 7%. • As labor displacement deepens and demand weakens inflation runs below the RBA’s target, pushing the Cash Rate below baseline. • Gains accrue to capital over labour; resources output holds up on autonomous extraction even as wages and consumption fall.
Source: Cushman & Wakefield Research, *scenarios will not sum to 100% to allow for other possible scenarios
Cushman & Wakefield
IMPACT ON REAL ESTATE FUNDAMENTALS BY ASSET TYPE
AI Impact Dimension
Office
Logistics & Industrial
Retail
Knowledge-worker employment & space use
Operational throughput & automation
Household income & discretionary spend
What AI primarily drives
Exposure to AI-driven employment shifts
High – demand tied to white-collar job growth
Limited – employment less space-intensive
Low – indirect consumer linkage
Second-order – efficiency flows through pricing & margins
Exposure to AI productivity gains
Second-order – efficiency may reduce space per worker
High – automation directly boosts utilisation
Downside risk if adoption disappoints
Structural vacancy risk
Cyclical demand risk
Supply-limited downside
Outcome uncertainty across AI scenarios
High
Moderate
Low
Near-term softness, long-term lift to demand
Net AI impact signal
Operational upside leader
Stable income support
Source: Cushman & Wakefield Research
Cushman & Wakefield
PROPERTY SCENARIOS/ASSUMPTIONS
SCENARIO 2 C&W Baseline
SCENARIO 1 Productivity-Led Expansion
SCENARIO 3 AI Bust - Slowcession
SCENARIO 4 Dystopic/Displacement
50% Probability
15% Probability
25% Probability
5% Probability
• Logistics & Industrial : Automation reduces some labor needs, but rising consumer demand drives steady demand for logistics & industrial space. • Office: Robust demand maintained, driven first by regional expansion and then by business formation and profit growth. • Retail: Retail labor is partially automated, but consumer spending growth supports moderate retail space demand. • Property values: Appreciate throughout the forecast horizon as supply/demand dynamics continue to improve.
• Logistics & Industrial: Weaker consumer demand and delayed capital spending slow absorption, softening logistics & industrial space demand. • Office: Job losses and weaker business confidence reduce • Retail: Pullbacks in discretionary spending weigh on retail sales, leading to weaker retail demand. • Property values: Weaker fundamentals and tighter financial conditions place downward pressure on values over the forecast period. office usage, pressuring demand and vacancy.
• Logistics & Industrial: Automation reduces labor needs, but weaker consumption limits growth in logistics & industrial space demand. • Office: Job displacement and cost-cutting reduce office usage, weighing on demand.
• Logistics & Industrial: Automation deepens, but stronger output, consumer demand and a higher share of online-spending drive above- baseline demand for logistics & industrial space. • Office: AI augments knowledge workers, increasing office usage across a range of industries and supporting higher-quality space. • Retail: Faster wage growth lifts consumer spending, supporting above-baseline retail rent growth, though tempered by increased online spending. • Property values: Stronger fundamentals and slightly lower rates support above- baseline appreciation over the forecast period.
• Retail: Slowing income growth and weaker
consumption pressure retail sales and space demand.
• Property values: Mixed productivity gains and weaker demand place
pressure on values, despite localised investment in AI infrastructure.
Source: Cushman & Wakefield Research Moody’s Analytics
Cushman & Wakefield
ECONOMIC SCENARIOS Part 3
AI IMPACT: GDP
Real GDP growth, annual % change
Baseline:
• Economic growth holds near trend, supported by AI-linked investment in physical infrastructure and population-driven demand. • The baseline assumes elevated asset valuations persist, supporting household consumption and an increasingly strong pipeline of investment into AI infrastructure. • Real GDP growth holds in the 2% to 3% range, softer near-term amid a cyclical slowdown before recovering and normalising, supported by AI-led productivity gains.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
2.0% 2.1% 2.6% 4.1% 4.4% 4.2%
S2: Baseline
2.0% 1.7% 1.8% 2.9% 2.9% 2.4%
S3: Downside - AI Bust
2.0% 1.0% -0.3% 3.7% 4.1% 3.1%
S4: Downside - Displacement
2.0% 1.8% 2.1% 3.5% 3.8% 3.5%
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: LABOUR PRODUCTIVITY
GDP per hour worked, annual % change
Baseline:
• Productivity growth recovers through the end of the decade as AI diffusion begins to lift output per hour. • The baseline assumes gradual, broad-based adoption rather than a step change: productivity settles near 1.2% per annum, close to the long- run average though below the early-2000s peak. • Productivity is the primary transmission channel for AI; differences across scenarios are sharper here than in GDP.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
-0.2% 0.3% 1.8% 2.2% 2.3% 2.5%
S2: Baseline
-0.2% -0.1% 1.0% 1.2% 1.2% 1.3%
S3: Downside - AI Bust
-0.2% -0.4% 0.5% 1.6% 1.6% 1.5%
S4: Downside - Displacement
-0.2% 0.2% 1.8% 2.6% 2.9% 3.1%
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: JOB GROWTH Annual change in total employment, thousands
Baseline:
• Employment continues to expand at roughly 180- 250k jobs per year, as the driver of growth transitions from non-market sectors to white- collar employment. • The baseline assumes AI adoption is absorbed through redeployment rather than displacement: hiring moderates at the margin, but no year records net job losses. • Job growth decelerates modestly late in the horizon as modest demographic headwinds slow the growth of the labour force.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
+238 +306 +302 +296 +300 +251
S2: Baseline
+238 +246 +202 +206 +230 +181
S3: Downside - AI Bust
+120 +230 +200
+238 +130 -108
S4: Downside - Displacement
+238 +200 +130 +90 +70 +60
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: OFFICE EMPLOYMENT
Annual change in office-using industries
Baseline:
• Office-using employment adds roughly 60 to 85 thousand jobs per year, with 2026 the softest as tighter policy weighs on hiring, before growth firms as rate cuts come into view. • Office-using industries account for around a third of total job growth despite being closer to a quarter of employment: AI reshapes the composition of white-collar work rather than reducing headcount.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
+82
+110 +109
+113
+108
+41
+70 +83
+73
+73
+66
S2: Baseline
+41
S3: Downside - AI Bust
+25
-75
+13
+105
+88
+41
S4: Downside - Displacement
+58
+57
+29
+13
-4
+41
• Growth settles into a 60 to 70 thousand band from 2030, above the long-run average.
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: INFLATION
Headline Consumer Price Index, annual % change
Baseline:
• Inflation peaks near 4.5% in 2026 before moderating as supply pressures ease and demand normalises. • Inflation settles in the middle of the RBA's 2-3% target band from 2028, as the lagged effect of tighter policy works through the economy, energy prices normalise, and a gradually cooling labour market eases wage pressures.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
2.8% 4.4% 2.8% 2.0% 2.1% 2.1%
S2: Baseline
2.8% 4.5% 3.1% 2.4% 2.5% 2.5%
S3: Downside - AI Bust
2.8% 4.3% 2.3% 1.5% 1.9% 2.2%
S4: Downside - Displacement
2.8% 4.3% 2.5% 1.5% 1.4% 1.3%
• Modest productivity gains help absorb residual cost pressures later in the horizon.
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: CASH RATE
RBA Cash Rate Target
Baseline:
• The cash rate holds near 4.2% through 2027 while inflation completes its return to target, then eases toward 3.6% and settles. • Cutting begins in the second half of 2027 once trimmed mean inflation is gliding back toward the target midpoint, with the cash rate easing to around 4% by year-end and settling near 3.6% by 2029. • Rates settle at the RBA's estimated neutral level, leaving the baseline without a rate-driven tailwind for asset prices that has occurred during previous easing cycles.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
3.9% 4.2% 3.9% 3.6% 3.6% 3.6%
S2: Baseline
3.9% 4.2% 4.2% 3.7% 3.6% 3.6%
S3: Downside - AI Bust
3.9% 3.7% 2.5% 2.5% 2.9% 3.1%
S4: Downside - Displacement
3.9% 4.2% 3.2% 2.2% 2.0% 2.0%
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: LONG TERM YIELDS 10-Year Commonwealth Government Treasury Yield, year-end
Baseline:
• Long yields drift gradually lower, easing from around 5% toward 4.3% by 2030 as inflation returns to target and the cash rate normalises. • Yields settle roughly 70 basis points above the cash rate, a normal gap by historical standards, reflecting steady government debt issuance that markets absorb without stress. • The decline is slow as solid investment demand across the economy keeps yields from falling much further, so there is no return to the ultra-low rates of the 2010s.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
4.4% 4.9% 4.6% 4.6% 4.6% 4.6%
S2: Baseline
4.4% 5.0% 4.7% 4.4% 4.4% 4.3%
S3: Downside - AI Bust
4.4% 5.2% 5.0% 4.8% 4.6% 4.5%
S4: Downside - Displacement
4.4% 4.9% 4.4% 3.2% 3.2% 3.4%
Source: Cushman & Wakefield Research
Cushman & Wakefield
CITY SCENARIOS Part 5
AI IMPACT: ADELAIDE Real Gross Value Added, annual % change
• Growth is the softest of the mainland capitals early in the horizon, near 1% in 2026, before building toward 2.4% as the AUKUS submarine program scales up and Australia’s productivity growth recovers more broadly. • Defence procurement provides a long, predictable demand pipeline that operates independently of the economic cycle: a slow start, but the most stable trajectory of any capital.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
2.0% 1.2% 1.7% 3.2% 3.5% 3.5%
S2: Baseline
2.0% 1.0% 1.2% 2.4% 2.4% 2.2%
S3: Downside - AI Bust
2.0% 0.7% -0.2% 2.6% 2.9% 2.6%
S4: Downside - Displacement
2.0% 1.2% 1.7% 2.9% 2.7% 2.3%
• As a result, Adelaide has a relatively narrow scenario dispersion.
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: BRISBANE Real Gross Value Added, annual % change
• Growth firms from a soft 2026 toward 2.5% as interstate migration continues and the 2032 Olympic Games construction pipeline builds through the second half of the decade. • The Olympic construction pipeline provides a demand floor that moderates downside outcomes through the end of the decade. • In the displacement case, GVA growth tracks close to baseline through 2028 before the household income drag pulls it modestly below.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
5.4% 2.1% 2.2% 3.6% 4.0% 4.1%
S2: Baseline
5.4% 1.9% 1.6% 2.6% 2.6% 2.5%
S3: Downside - AI Bust
5.4% 1.4% -0.7% 2.9% 3.5% 3.1%
S4: Downside - Displacement
5.4% 2.2% 2.2% 3.0% 2.6% 2.1%
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: CANBERRA Real Gross Value Added, annual % change
• Growth holds in a narrow 2.1-2.7% band across the horizon — the steadiest of any capital, reflecting an economy anchored by Commonwealth government employment • Canberra is the only capital with GVA growth above baseline in every alternative scenario. Commonwealth employment expands counter- cyclically as AI regulation, displacement response and crisis management functions grow. • Conversely, Canberra captures the least upside in the expansion scenario, as public sector output responds more slowly to private productivity gains than market sectors do.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
2.9% 2.3% 2.5% 3.4% 3.4% 3.5%
S2: Baseline
2.9% 2.1% 2.1% 2.7% 2.5% 2.4%
S3: Downside - AI Bust
2.9% 2.4% 3.6% 3.7% 3.0% 2.6%
S4: Downside - Displacement
2.9% 2.5% 3.0% 3.8% 3.7% 3.6%
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: MELBOURNE Real Gross Value Added, annual % change
• Melbourne is the fastest-growing capital in the baseline, with growth above 3% supported by the strongest population inflows of any city and a broad industry base spanning professional services, education and advanced manufacturing. • In the displacement case AI-driven output gains from advanced manufacturing hold GVA close to baseline even as employment weakens. • Non-market sectors softens the impact of the displacement scenario on the labour market but does not completely offset the impact.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
1.2% 3.6% 3.6% 4.7% 4.9% 4.9%
S2: Baseline
1.2% 3.4% 3.0% 3.6% 3.5% 3.2%
S3: Downside - AI Bust
1.2% 2.9% 0.6% 3.9% 4.4% 3.9%
S4: Downside - Displacement
1.2% 3.7% 3.7% 4.1% 3.6% 2.9%
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: PERTH
Real Gross Value Added, annual % change
• Perth enters the forecast growing fastest of any capital, near 5% in 2026, before decelerating below 2% by 2030 as the current resources investment wave matures. • Slower growth represents a normalisation, not a downturn as resource sector activity remains elevated, but momentum fades as projects complete. • Demand for resources and increased office employment in the mining sector offers a countercyclical buffer to the labour market in the displacement scenario.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
4.3% 5.1% 3.1% 4.4% 4.5% 4.0%
S2: Baseline
4.3% 4.8% 2.2% 3.0% 2.7% 1.9%
S3: Downside - AI Bust
4.3% 4.1% -1.2% 3.5% 4.0% 2.8%
S4: Downside - Displacement
4.3% 5.3% 3.3% 4.2% 3.7% 2.7%
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: SYDNEY Real Gross Value Added, annual % change
• Sydney has the heaviest concentration of financial and professional services, two of the industries with high AI exposure.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
1.6% 2.8% 2.9% 3.9% 4.2% 4.4%
• The upside case lifts growth to above 4% by the end of the decade as AI-enabled services expand into new client segments. The AI Bust case produces a contraction in 2027 followed by a robust expansion through 2030. • The composition of Sydney’s workforce means that it is where the scenarios become visible first, making Sydney's labour market the bellwether for which path is unfolding.
S2: Baseline
1.6% 2.6% 2.2% 2.7% 2.7% 2.6%
S3: Downside - AI Bust
1.6% 2.0% -0.6% 3.1% 3.8% 3.3%
S4: Downside - Displacement
1.6% 3.0% 3.0% 3.1% 2.4% 1.7%
Source: Cushman & Wakefield Research
Cushman & Wakefield
PROPERTY SCENARIOS Part 4
AI IMPACT: OFFICE Prime CBD office vacancy rate*
• Office is the asset class with the widest scenario dispersion, because demand, driven by office employment, is amongst the most exposed to both the upside and downside risks from AI. • Supply helps to limit any upside risk to vacancy across all scenarios: over the next five years average annual prime supply is forecast to be less than half of what it was over the previous five in the baseline scenario. • A near-term supply-freeze combined with a surplus of employment growth benefits the expansion scenario as existing space is quickly absorbed, and prime vacancy falls below 5% by 2033.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
14.3% 14.1% 13.7% 11.4% 10.0% 7.8%
14.3% 14.4% 14.3% 12.3% 11.2% 9.0%
S2: Baseline
S3: Downside - AI Bust
14.3% 15.7% 17.4% 16.2% 15.9% 13.5%
S4: Downside - Displacement
14.3% 15.1% 16.1% 15.9% 16.9% 17.6%
*Includes Adelaide, Brisbane, Canberra, Melbourne, Perth and Sydney Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: OFFICE
Office total returns, YoY
• Stable vacancy and cap rates cap net operating income and capital growth through 2027. Beyond this vacancy begins to tighten as long-term yields normalize, providing a catalyst for NOI growth alongside cap rate compression and a dual tailwind for office returns.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
13.0% 12.6% 11.2% 21.6% 20.7% 23.0%
S2: Baseline
13.0% 12.4% 10.0% 19.7% 19.0% 21.5%
• Structurally lower vacancy in the expansion scenario reduces the risk profile of offices, tightening the spread to the risk-free rate.
S3: Downside - AI Bust
13.0% 8.1% 2.2% 12.1% 13.7% 17.7%
S4: Downside - Displacement
13.0% 10.5% 5.2% 10.9% 7.6% 6.1%
• Risk-off sentiment hampers the recovery in the AI bust scenario, while in the displacement scenario capital growth turns negative from 2030.
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: LOGISTICS & INDUSTRIAL
Prime L&I vacancy rate*
• Industrial is the most resilient sector across the scenario range: demand is anchored in household consumption flowing through retail and 3PL networks, with AI adding a tailwind regardless of the labour market trajectory. • Development slows quickly in the bust scenario, limiting vacancy risk, but cannot keep pace with consumer-driven 3PL demand in the upside case. • The displacement scenario is constructive for new automated facilities but it splits the prime market, as stock unable to support automation competes for a shrinking user base.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
3.4% 3.2% 2.3% 1.2% 0.5% 0.2%
3.4% 3.5% 2.5% 1.8% 0.7% 1.8%
S2: Baseline
S3: Downside - AI Bust
3.4% 3.7% 3.3% 2.1% 2.2% 2.8%
S4: Downside - Displacement
3.4% 3.3% 2.3% 2.4% 2.3% 2.2%
*Includes Adelaide, Brisbane, Melbourne, Perth and Sydney Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: LOGISTICS & INDUSTRIAL
L&I total returns, YoY
• Vacancy sharpens quickly post-2027 amid a slowdown in new supply, lifting both capital and income growth before normalising post-2030. • This dynamic is exacerbated in the upside scenario where a more rapid increase in the share of online retail provides a structural lift to
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
5.7% 14.1% 6.5% 26.3% 30.5% 27.1%
S2: Baseline
5.7% 11.4% 3.7% 24.0% 26.9% 23.2%
returns, though they remain below the exceptional levels of 2020 and 2021.
S3: Downside - AI Bust
5.7% 7.8% 1.1% 13.8% 18.9% 20.6%
S4: Downside - Displacement
5.7% 10.6% 1.9% 22.8% 26.8% 24.0%
• In the displacement scenario the increase in the share of online spending offsets the decline in overall spending, boosting returns even as cap rates remain higher than in other scenarios.
Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: RETAIL*
Gross rental growth, YoY
• Retail transmits AI impacts through the household income channel rather than direct labour substitution.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
4.5% 5.4% 1.5% 1.5% 3.0% 3.5%
• AI-enabled e-commerce increases the share of online retail in total spending, limiting rental growth in the upside scenario.
S2: Baseline
4.5% 5.3% 1.0% 0.6% 2.0% 2.6%
S3: Downside - AI Bust
4.5% 4.9% -1.6% -1.4% 2.8% 3.3%
• In the displacement scenario a weaker job market reduces both the consumer base and international student demand.
S4: Downside - Displacement
4.5% 5.2% 0.6% -0.7% -0.1% -0.1%
*Weighted average of regional, sub-regional, neightbourhood & CBD centres Source: Cushman & Wakefield Research
Cushman & Wakefield
AI IMPACT: RETAIL
Retail total returns, YoY
• The inflation-driven increase in long-term yields in 2026 and 2027 pushes cap rates modestly higher through 2028, but they remain below 6%. • In the bust scenario, capital growth declines by ~5% as a temporary shift away from discretionary spending pulls down NOI and the demand shock is deflationary, reducing the overall value of retail spending. • Non-discretionary spending offers stability in the displacement scenario, while an increase in discretionary spending in the upside scenario helps to offset a higher share of online spend.
2025 2026F 2027F 2028F 2029F 2030F
S1: Upside - Expansion
11.8% 10.5% 5.8% 7.8% 15.9% 9.5%
S2: Baseline
11.8% 10.0% 5.0% 6.1% 14.3% 8.9%
S3: Downside - AI Bust
11.8% 9.3% 0.7% 7.3% 10.3% 6.6%
S4: Downside - Displacement
11.8% 9.4% 3.6% 3.7% 12.3% 7.3%
Source: Cushman & Wakefield Research
Cushman & Wakefield
STRATEGIES/ RECOMMENDATIONS Part 6
WHAT OCCUPIERS SHOULD DO
TIMING / TRIGGER POINTS
Don’t time the AI curve Time adoption
Focus, Flex, Futureproof
PRACTICAL ACTIONS
BUILD OPTION VALUE Use flex, breaks options expansion rights
WATCH THE BAROMETER Track utilisationsignals, watch for inflections
RECUT DEMAND PLANNING Map workflows to space
3
2
1
SECTORAL ADVICE
AI IMPACT
OCCUPIER RESPONSE
OFFICES
Workforce volatility increases
Add flex buffer capacity
Routine work automates
Renew short on commodity
Bifurcation widens
Secure hubs and upgrade spec
Business formation accelerates
Lock in best space early
RETAIL
Spend concentrates in winners
Double down on prime nodes
Stores split: experience vs service
Refit formats, exit middle
LOGISTICS & INDUSTRIAL
Network redesign drives churn
Add swing space optionality
Optimisation drives advantage
Secure power-ready nodes
DATA CENTRES
Power constraints cap supply
Bank power, phase capacity
LIVING
Ops become predictive
Upgrade digital operating stack
HEALTH
Triage shifts upstream
Target access-rich outpatient sites
EDUCATION
Teaching unbundles
Shift estate to labs/studios
IMPLICATIONS FOR INVESTORS
TIMING / TRIGGER POINTS
Markets price the future early Repricing leads adoption
Reprice, Reweight, Reposition
PRACTICAL ACTIONS
STAGE CAPITAL WITH OPTIONS Phase commits, secure rights, keep dry powder
FOCUS ON THE REVERSION Stress rents, downtime, exit liquidity
UNDERWRITE ADAPTABILITY Price capex, reconfigure, upgrade headroom
3
2
1
SECTORAL ADVICE
AI IMPACT
INVESTOR ACTIONS
OFFICES
Workforce volatility increases
Underwrite shorter lease risk
Routine work automates
Underweight commodity stock
Bifurcation widens
Overweight adaptable prime
Business formation accelerates
Build exposure in growth hubs
RETAIL
Spend concentrates in winners
Back prime destinations
Middle weakens
Avoid generic boxes
LOGISTICS & INDUSTRIAL
Network redesign drives churn
Target liquid corridors
Power becomes constraint
Buy power optionality
DATA CENTRES
Power constraints cap supply
Back permitted, powered sites
LIVING
NOI dispersion widens
Back operators + tech stack
HEALTH
Intermediate layer grows
Target outpatient nodes
EDUCATION
Consolidation accelerates
Back winners, repurpose surplus
ABOUT CUSHMAN & WAKEFIELD
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for occupiers and investors with approximately 53,000 employees in over 350 offices and nearly 60 countries. In 2025, the firm reported revenue of $10.3 billion across its core service lines of Services, Leasing, Capital markets, and Valuation and other. Built around the belief that Better never settles, the firm receives numerous industry and business accolades for its award-winning culture. For additional information, visit www.cushmanwakefield.com.
Authors:
Sean Ellison Associate Director, Economics & Forecasting sean.ellison@cushwake.com
Dr. Dominic Brown Head of International Research, APAC & EMEA dominic.brown@cushwake.com
Kevin Thorpe Chief Economist kevin.thorpe@cushwake.com
© 2026 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
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