04 WHAT HAPPENS NEXT
CUSHMAN & WAKEFIELD | 27
AUSTRALIA'S OCCUPIER MARKET OUTLOOK
NEW SUPPLY RESPONSE UNLIKELY BEFORE 2029 Development economics remain challenging, pointing to constrained new supply and renewed rental pressure as existing availability is absorbed.
Economic rents sit above market rents Current market vs economic net face rent ($/sqm)
Feasibility gap persists until 2029 Economic rent vs market net effective rent, national average ($/sqm)
Development feasibility has deteriorated further in 2026 as construction and funding costs have risen. Projects commencing in 2025 benefited from expectations of further yield compression; however, rising rates and the prospect of further increases have put pressure on the current pipeline. At current land values, economic rents remain 10 to 25% above prevailing market rents across several key markets. Developers are therefore reassessing projects, while increasingly pushing project commencements further out. We previously expected development feasibility to begin improving in early 2027. The changed yield and rate outlook has pushed the expected recovery in development feasibility closer to 2029. With new supply likely to remain constrained in the interim, rental growth will increasingly depend on how quickly existing vacancy is absorbed. Some projects may still proceed sooner. Sites acquired before 2021 can be more viable because of their lower input land cost. Rising holding costs, particularly capitalised interest, may also prompt some developers to accept lower margins and commence construction.
$200
Sydney Outer West
$180
Sydney Central West
Melbourne West
$160
Melbourne North
$140
Melbourne South East
Brisbane South
$120
Brisbane TC
$100
Brisbane West
Perth South
$80
Adelaide Inner North
$60
2015
2018
2021
2024 2027F 2030F
$0 $50 $100 $150 $200 $250 $300 $350
Economic rent
Current market rent
Economic rent
Market net effective
Dashed = forecast
Source: Cushman & Wakefield Research
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