Industrial continues to be the favoured commercial real estate sector for private investors

The report found that globally the commercial real estate (CRE) market rebounded in 2024, rising by 8% to US$806 billion, and Australia was the sixth most active market with volumes rising by 57% in US dollar terms to reach $32.8 billion.

Both globally and locally, industrial was the most invested CRE sector last year. Globally the sector accounted for just over a quarter of all global investment at US$216 billion. Living was close behind at US$205 billion, while Office investment reached US$173 billion. In Australia industrial investment totalled US$15.9 billion in 2024, underpinned by significant activity in data centres, while office and retail volumes totalled $6.1 billion each.

It seems industrial is also the favoured sector for private investors at least this year in Australia, with Knight Frank’s The Wealth Report 2025 finding, via a survey of 150 family offices*, that In Australia the top three real estate sectors for investment moving forward are industrial (42%), data centres (21%) and infrastructure (18%).

Preferred sectors for investment (% of respondents)

Globally industrial industrial/logistics (13%) came in as the second favoured sector for private investors in 2025, behind living sectors (14%), while luxury residential (12%) was third. 

Knight Frank National Head of Industrial Logistics James Templeton said that while the industrial market had normalised in recent years it was still one of the most favoured sectors for investors in Australia.

“The industrial sector remains one of the strongest sectors of the Australian commercial property market,” he said.

“The market has cooled from the boom conditions we saw for several years, but it remains one of the most stable sectors, with rents continuing to grow, albeit at lower rates, and ongoing tenant demand.

“As we outlined in our recent Australian Horizon 2025 report, vacancy is expected to rise further in 2025 due to rising supply rather than weaker demand. 

“We are seeing a deepening divergence in rental growth performance depending on location, and in particular the levels of supply and demand in each location.

“We expect to see careful selection of assets by investors, but ongoing activity is anticipated as the sector continues to be sought after.”

Knight Frank Chief Economist Ben Burston said:

“With a more favourable macro climate following the first interest rate cut and the return to growth in asset values, investor demand for industrial assets is resurgent and we expect the sector to lead the Australian market recovery.

The desire to build exposure to the sector is driving more competition for stock, particularly in Sydney, which will drive further growth in values as the year progresses. However, the recovery will not occur at the same speed in all markets, with activity in Melbourne currently lagging due to the imposition of new taxes which have knocked investor confidence.”

 View the wealth report here