Property funds get first uplift in 3 years

In what represents a glimmer of hope, office funds have posted their first capital uplift in three years, according to the MSCI/Mercer Australian Core Wholesale Property Fund Index.

The positive news for office funds came as the index recorded its strongest quarterly total return since 2022, delivering 2% and 0.9% with retail funds leading in all sectors.

Commenting on the index, MSCI Head of Private Assets Research, Pacific, Ben Martin-Henry said that with 15 of 16 funds recording positive total returns, it is clear the market has moved past the bottom of the cycle.

More broadly, the MSCI commentary said that Australia’s commercial property market had continued its recovery through the third quarter of the calendar year, with transaction volumes reaching $13.2 billion, representing a 58% increase over the same period last year.

It said year-to-date volumes have reached $34.3 billion, up 38% from 2024. Larger, more complex transactions have re-emerged, with portfolio and entity-level deals accounting for nearly half of quarterly activity.

Martin-Henry said investor confidence continues to build as pricing stabilises and financing conditions improve.

“The return of larger portfolio and entity-level deals shows that institutional capital is re-engaging across the market,” he said.

The retail sector was the standout performer with $2.9 billion in transactions, up 32% year-on-year, led by renewed demand for large regional and sub-regional shopping centres. The industrial sector followed closely with $3.2 billion, up 15% from a year earlier, while office transactions totalled $2.1 billion, down 25% but showing early signs of recovery on a year-to-date basis.

Alternative real estate sectors such as living, data centres and seniors housing continue to grow in importance, together accounting for 26% of income-producing volumes this year. The largest deal of 2025 was Scape’s $4 billion joint acquisition of Aveo with Korea’s National Pension Service.