Article

Lenders remain optimistic about Australian commercial real estate market in 2025 despite global uncertainty

CBRE survey reveals 56% of lenders plan growth in commercial real estate

Commercial real estate lenders are maintaining a positive outlook despite ongoing global uncertainty, with most planning to increase their loan portfolios in the coming months. This confidence translates into potential opportunities for diverse stakeholders across Australia’s commercial property market, from Melbourne warehouse developers to Brisbane student accommodation investors.

Recent analysis of 34 major lenders reveals sustained institutional confidence, creating a more competitive financing environment that may benefit qualified borrowers. For Victorian businesses seeking commercial premises or investors evaluating property opportunities, understanding these lending trends provides crucial market intelligence for strategic decision-making.

Survey findings reveal strong lender confidence

Key Survey Results:

  • 56% of lenders plan to grow commercial real estate exposures
  • 0% of lenders intend to decrease their lending activities
  • 34 major lenders participated across local banks, international banks, and non-banks
  • Steady demand for commercial mortgages reported over the past year

According to the CBRE Lender Sentiment Survey, this unanimous commitment to maintaining or expanding portfolios represents one of the strongest shows of confidence in recent survey history.

What this means for borrowers

This widespread optimism among financial institutions suggests several positive developments for the commercial property market:

Increased financing availability

With more lenders actively seeking growth opportunities, qualified borrowers may find expanded options when seeking commercial property finance. This competitive environment could translate to more favourable terms for well-positioned projects.

Diverse lender participation

The survey’s inclusion of local banks, international institutions, and non-bank lenders indicates broad-based confidence across different types of financial institutions, potentially offering borrowers various financing structures and approaches.

Sector preferences show clear winners and challenges

Lender Preference Rankings:

  • Industrial & logistics - Continues to dominate preferences
  • Residential property - Maintains strong appeal
  • Build-to-rent - Showing increased interest from H2 2024
  • Student accommodation - Nearly 25% rank it in top two preferences
  • Data centres - Declined from 3rd to 5th place

The industrial and logistics sector continues to dominate investment preferences among lenders, followed closely by residential property. These rankings reflect both current market performance and lenders’ expectations for future sector resilience.

Industrial and logistics: The market leader

Why lenders favour this sector

Industrial properties benefit from several factors driving sustained lender confidence:

  • E-commerce growth continues to fuel demand for warehouse and distribution facilities
  • Supply chain resilience has become a priority for businesses post-pandemic
  • Melbourne’s western corridor and Sydney’s southwestern regions remain hotspots for development

Practical implications for stakeholders

Manufacturing businesses seeking facilities or investors targeting industrial assets may find more competitive financing options available. However, prime locations with strong transport connectivity command the most favourable lending terms.

Residential property shows sustained appeal

The residential sector’s continued strength reflects fundamental housing demand dynamics. For developers and investors, this sustained lender interest may facilitate:

  • Apartment development projects in growth corridors
  • Townhouse developments in established suburbs
  • Mixed-use residential projects combining retail and residential elements

Build-to-rent gains momentum

Build-to-rent properties ranked third in popularity, showing a slight increase in interest compared to the second half of 2024. This emerging asset class offers institutional investors:

Market opportunity indicators

  • Rental housing shortages in major capitals create sustained demand
  • Professional management appeals to time-poor tenants
  • Stable income streams attract institutional capital

Geographic focus areas

Victorian build-to-rent developments near transport hubs and employment centres appear particularly attractive to lenders, especially projects demonstrating strong pre-leasing or management partnerships.

Student accommodation emerges as significant opportunity

Student accommodation has emerged as a significant area of interest, with nearly a quarter of lenders ranking it among their top two preferences. This recognition reflects several market drivers:

Demographic and market factors

  • International student recovery following border reopenings
  • Purpose-built accommodation shortages near major universities
  • Melbourne and Adelaide present strong opportunities given their large student populations

Office sector faces continued headwinds

Meanwhile, lenders maintain a cautious approach toward office real estate, reflecting ongoing concerns about the sector’s performance. The office market continues navigating fundamental shifts in workplace patterns, hybrid working arrangements, and evolving tenant space requirements.

Flight to quality becomes the norm

“Amid caution in the office sector, we are seeing lenders take a considered approach to the sector reflective of flight to quality in the asset class,” said Will Edwards, CBRE debt and structure finance director.

What qualifies as “quality” in today’s market

Lenders are focusing on office properties that demonstrate:

  • Premium locations in CBD cores or established business districts
  • Modern amenities including end-of-trip facilities, collaborative spaces, and technology infrastructure
  • Strong tenant covenants with established businesses on medium to long-term leases
  • ESG credentials meeting increasing corporate sustainability requirements

Geographic preferences emerge

Within the office sector, certain locations maintain stronger lender appeal:

  • Melbourne CBD A-grade towers with major tenant anchors
  • Sydney CBD core properties with transport connectivity
  • Brisbane’s commercial precincts benefiting from interstate migration
  • Suburban business parks offering parking and flexible spaces

Practical implications for office stakeholders

For property owners

Existing office property owners should prepare for more rigorous refinancing processes. Lenders may require:

  • Detailed tenancy schedules showing lease terms and tenant quality
  • Capital improvement plans demonstrating asset competitiveness
  • Market positioning analysis relative to competing properties

For potential investors

Office sector opportunities may exist for investors who can meet heightened lender requirements and identify assets with strong fundamentals. However, thorough due diligence becomes even more critical in the current environment.

Tenant-driven market evolution

The cautious lending approach reflects broader market realities where tenant preferences drive asset performance. Modern businesses increasingly seek:

  • Flexible lease terms accommodating hybrid work arrangements
  • Wellness-focused environments supporting employee health and productivity
  • Technology-enabled spaces facilitating collaborative and remote work integration

Data centres experience preference shift

Data centres, which were highly favoured in the second half of 2024, have seen a decline in preference, dropping from third to fifth place among lenders’ priorities. This shift indicates changing dynamics in the commercial property landscape and evolving lender perceptions of different asset classes.

Market evolution affects lender views

The movement in data centre preference rankings reflects the rapidly evolving nature of technology infrastructure investments. While the sector remains significant, lenders may be reassessing risk profiles and return expectations based on market developments and competition dynamics.

This preference shift could influence financing availability and terms for data centre projects, though individual proposals with strong fundamentals may still attract competitive interest from specialised lenders.

Broader market implications

The changing preference rankings across different commercial property sectors highlight the importance of staying informed about lender sentiment when planning investments or refinancing activities. Market conditions and preferences can evolve relatively quickly, affecting financing landscapes for different property types.

Interest rate outlook shapes lending decisions

Interest Rate Survey Findings:

  • More than 50% of lenders anticipate two additional rate cuts in 2025
  • No consensus exists on cash rate levels by June 2026
  • Rate uncertainty continues to influence lending strategies and borrowing decisions

Regarding interest rates, more than half of the surveyed lenders anticipate two additional rate cuts during the remainder of 2025. However, there was no consensus among lenders about where the cash rate might stand by June 2026.

How rate expectations influence commercial property decisions

For borrowers considering timing

The expectation of near-term rate reductions may influence financing timing, though individual project fundamentals should remain the primary consideration. Some implications include:

  • Current borrowing costs may decrease over the coming months
  • Variable rate facilities could become more attractive relative to fixed rates
  • Refinancing strategies might benefit from professional timing advice

Planning for rate uncertainty

The lack of consensus about longer-term rates reinforces the importance of robust financial planning that accounts for various scenarios:

  • Stress testing loan structures against higher rate environments
  • Flexible financing terms that accommodate rate volatility
  • Professional guidance in structuring arrangements for different rate scenarios

Market timing considerations

While rate expectations provide context, successful commercial property investments typically depend more on:

  • Asset quality and location fundamentals
  • Tenant demand and lease structures
  • Individual borrower capacity and experience
  • Long-term market positioning rather than short-term rate movements

Strong market fundamentals support lending appetite

“The domestic banks sit on strong balance sheets and there has been a significant amount of capital raised in the private credit sector,” said Andrew McCasker, CBRE’s managing director of debt and structured finance. “This is underpinning competitive tension and strong appetite for lending to quality assets and sponsors.”

Banking sector strength provides foundation

The robust financial position of domestic banks creates a solid foundation for continued commercial real estate lending activity. Strong balance sheets typically enable lenders to pursue growth opportunities while maintaining appropriate risk management standards.

This financial strength among traditional lenders, combined with increased private credit sector activity, may create a more competitive environment that could benefit qualified borrowers through improved terms or increased financing options.

Private credit sector expansion

The significant capital raising in the private credit sector adds another dimension to the commercial property financing landscape. This additional source of capital may provide alternative financing options for projects that suit different risk and return profiles.

Competitive environment benefits quality projects

The combination of traditional bank strength and private credit growth appears to be creating competitive tension that favours quality assets and experienced sponsors. This competition may result in more attractive financing terms for well-structured projects with strong fundamentals.

However, this competitive environment also reinforces the importance of presenting high-quality propositions that meet lenders’ standards for assets and sponsor credentials.

Refinancing considerations and market factors

CBRE Research found that asset type and location were among the top three factors influencing lender appetite for refinancing. These findings provide important guidance for property owners planning refinancing activities in the current market environment.

Asset type remains fundamental

The continued importance of asset type in refinancing decisions reflects lenders’ ongoing focus on sectors with strong performance prospects. Properties in preferred sectors may experience more straightforward refinancing processes, while those in challenging sectors might face additional scrutiny.

Location considerations persist

Location remains a critical factor in lending decisions, with prime locations typically receiving more favourable attention from lenders. This emphasis on location quality reinforces traditional commercial real estate investment principles while highlighting the importance of geographic selection.

Strategic refinancing planning

Understanding these key factors can help property owners prepare more effectively for refinancing processes. Early engagement with professional advisors can assist in positioning assets optimally and addressing potential lender concerns proactively.

Implications for Victorian commercial property stakeholders

Despite elevated costs of debt, the overall sentiment among commercial real estate lenders remains positive, with increased appetite for new loans anticipated over the next three months. For Victorian stakeholders, this translates into tangible opportunities across multiple sectors and regions.

Opportunities by stakeholder type

For established investors

  • Portfolio expansion in preferred sectors like industrial and build-to-rent
  • Refinancing opportunities as competitive tension increases among lenders
  • Geographic diversification across Melbourne’s growth corridors and regional centres

For first-time commercial investors

  • Entry-level opportunities in emerging sectors like student accommodation
  • Joint venture possibilities with experienced developers in preferred asset classes
  • Professional guidance becomes even more valuable in navigating lender requirements

For businesses seeking premises

  • Owner-occupier financing may benefit from increased lender competition
  • Build-to-suit opportunities in industrial and logistics sectors
  • Flexible lease-to-own arrangements in some market segments

Geographic focus areas within Victoria

The positive lender sentiment creates opportunities across various Victorian regions:

Melbourne metropolitan opportunities

  • Western industrial corridor for logistics and manufacturing facilities
  • Inner-city build-to-rent developments near transport and employment hubs
  • Student accommodation near major universities in Carlton, Clayton, and Caulfield

Regional Victorian potential

  • Geelong industrial expansion linked to port and manufacturing growth
  • Ballarat residential development supporting population growth
  • Regional student accommodation serving university campuses outside Melbourne

Professional guidance becomes crucial

The complexity of current market conditions, with varying lender preferences across sectors and regions, emphasises the value of professional consultation. Licensed finance brokers can provide:

Market intelligence

  • Current lender appetites for specific asset types and locations
  • Competitive terms analysis across different financial institutions
  • Timing guidance for applications and settlements

Application structuring

  • Proposal optimisation to match lender preferences and criteria
  • Documentation guidance to streamline assessment processes
  • Risk mitigation strategies addressing potential lender concerns

The CBRE Lender Sentiment Survey reveals a commercial real estate financing landscape characterised by institutional confidence, sector-specific opportunities, and competitive dynamics that may benefit qualified borrowers. With 56% of major lenders planning portfolio growth and none intending decreases, the foundation exists for increased financing activity across preferred asset classes.

The importance of professional guidance

In an environment where lender preferences vary significantly across sectors and individual institutions maintain distinct criteria, professional advice becomes particularly valuable. Licensed finance brokers can navigate the complexity of current market conditions and help position proposals for optimal consideration.

Whether pursuing industrial development opportunities in Melbourne’s west, student accommodation near university precincts, or build-to-rent projects in transport-connected locations, understanding and aligning with current lender sentiment can significantly influence financing outcomes.

Further questions

What does the CBRE Lender Sentiment Survey mean for commercial property investors?
The CBRE survey shows strong confidence among commercial real estate lenders, with 56% planning to grow their portfolios and none intending to decrease lending activities. This suggests increased financing availability and competitive conditions for qualified borrowers. For investors, this may translate to more financing options, potentially better terms, and increased opportunities across preferred sectors like industrial, logistics, residential, and build-to-rent properties. However, individual loan assessments continue to depend on borrower credentials, asset quality, and project characteristics. The positive sentiment particularly benefits investors focusing on quality assets in preferred sectors and prime locations. Your complete financial situation will need to be assessed before acceptance of any proposal or product, and speaking with a licensed finance broker can help you understand what options may be available for your specific circumstances.
Which commercial property sectors are lenders most interested in financing?
According to the survey, lenders show clear preferences with industrial and logistics leading, followed by residential property in second place. Build-to-rent properties ranked third with increasing interest from the second half of 2024, while student accommodation emerged as significant, with nearly 25% of lenders ranking it among their top two preferences. Data centres declined from third to fifth place, indicating changing market dynamics. Lenders maintain a cautious approach toward office real estate, taking a selective approach that reflects flight to quality in that asset class. These preferences reflect broader economic trends, with industrial benefiting from e-commerce growth and supply chain focus, while residential sectors benefit from fundamental housing demand. Individual project assessment remains crucial regardless of sector preferences, with location, asset quality, and sponsor experience continuing to influence lending decisions.
How might interest rate changes affect commercial property finance decisions?
More than half of surveyed lenders anticipate two additional rate cuts during the remainder of 2025, though there's no consensus about where rates might stand by June 2026. This mixed outlook suggests several considerations for commercial property finance. Expected near-term rate reductions may reduce borrowing costs and improve investment returns, potentially making variable rate facilities more attractive relative to fixed rates. However, the uncertainty about longer-term directions emphasises the importance of robust financial planning that accounts for various rate scenarios. Successful commercial property investments typically depend more on asset quality, location fundamentals, tenant demand, and individual borrower capacity rather than short-term rate movements. The rate environment reinforces the value of professional advice in structuring financing arrangements that remain viable across different potential interest rate scenarios and stress testing loan structures against various rate environments.
What should businesses evaluate when seeking commercial property finance in the current market?
In the current positive lending environment, businesses should evaluate several key factors when seeking commercial property finance. Asset type and location rank among the top three factors influencing lender appetite, so businesses should focus on properties in preferred sectors and prime locations with strong fundamentals. Lender preferences favour industrial, logistics, residential, build-to-rent, and student accommodation sectors, while maintaining caution toward office properties. Quality becomes crucial, with lenders seeking modern amenities, strong tenant covenants, ESG credentials, and premium locations. Businesses should prepare comprehensive documentation including detailed financial assessments, market positioning analysis, and capital improvement plans where relevant. The competitive lending environment may provide more financing options for qualified borrowers, but thorough preparation remains essential. Professional guidance from licensed finance brokers can provide valuable market intelligence, help structure optimal proposals, and navigate varying lender criteria across different institutions and asset types.
Why is professional advice important for commercial real estate financing decisions?
Professional advice becomes particularly valuable in the current commercial real estate financing environment due to the complexity of varying lender preferences, sector-specific criteria, and individual institutional requirements. Licensed finance brokers provide crucial market intelligence about current lender appetites for specific asset types and locations, competitive terms analysis across different financial institutions, and timing guidance for applications and settlements. They can help structure proposals to match lender preferences, provide documentation guidance to streamline assessment processes, and develop risk mitigation strategies addressing potential lender concerns. With 34 different lenders surveyed showing varying preferences across sectors, professional guidance helps navigate this complexity and position proposals optimally. The competitive environment created by strong bank balance sheets and expanded private credit availability requires expert knowledge to access the most suitable financing options. Your complete financial situation needs professional assessment before any commercial property financing arrangement, making qualified advice essential for successful outcomes in the current market environment.

This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.

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