Australian Real Asset | Capital Foresight 2026
Australia’s real asset investment landscape is shifting. Discover the key themes reshaping returns – and the investment implications that matter in 2026.
The next real asset cycle will be shaped by dispersion, not averages. As technology, demographics and supply constraints reshape markets, returns are diverging sharply by sector, asset quality and location. Dexus’s Australian Real Asset Capital Foresight 2026: Era of dispersion, explores how these structural shifts are redefining opportunity across Australian real assets – from living sectors and data centres to premium office and retail. Through five key themes, the report highlights where fundamentals are strengthening, where risk is rising, and how investors can position for a more selective, differentiated cycle ahead.
Key themes driving returns
- Demographic dividend
- Pipeline pivot
- Demand reallocated
- Productivity pays
- Era of dispersion
Demographic dividend: Australia’s unique and growing advantage
Supported by resilient fundamentals and policy settings, Australia is one of APAC’s most sought‑after investment markets. The population is growing faster than any developed peer. It's ageing rapidly. And it hosts more than 800,000 international students who need somewhere to live. These shifts are creating demand for healthcare assets, seniors living, and student accommodation that won't be met by current supply.
Theme insights
01
In 2025, Australia was the fifth largest global destination for cross-border commercial real estate investment with overseas investors deploying $19.7 billion into the market.
02
Australia's population is forecast to grow at 1.2% p.a. over the next five years and 1% p.a. over the next 20 years - driven by net overseas migration and concentrated in capital cities and other urban areas. Combined, this creates a demand profile for Australian real assets with no parallel among developed nations.
03
Government policy is accelerating a structural shift toward higher density living in Australia's capital cities. Our cities have extremely low population density by international standards, presenting a significant opportunity for value uplift in infill locations as densification accelerates.
The Dexus take
Australia’s population growth has no parallel among developed nations. Invest in seniors living, PBSA and healthcare where structural undersupply meets accelerating demand. Prioritise infill assets positioned to benefit from government-led densification. Cross-border capital flows into Australian real assets will intensify.
Pipeline pivot: Development is rotating into alternatives
Investors seeking development exposure must look to different opportunities than those that dominated the last cycle. This marks where the next cycle's development opportunities will be concentrated. Sectors facing supply drought will deliver returns through rental growth and capital appreciation on existing stock. Sectors with significant demand will attract construction activity and deliver returns through value-add development, with corresponding risk and capital requirements.
Theme insights
01
Feasibility pressures and tighter credit have curtailed new office, industrial and retail supply, while demand and returns are pulling development toward living sectors and data centres.
02
Population growth, housing shortages and AI-driven digital infrastructure needs are sustaining development in living assets and data centres, with spill-over opportunities in power and utility infrastructure.
03
Deferred and abandoned projects have created supply droughts across the core sectors, positioning high-quality, well-located assets to benefit from rental growth and capital appreciation as demand recovers.
The Dexus take
Development returns are rotating toward living sectors, data centres and enabling infrastructure. Core real estate pipelines have frozen, creating a supply drought that supports rental growth in stabilised office, retail and infill industrial
Demand reallocated: How tech is reshaping real assets
Technology will be a net driver of real asset demand in 2026, but its impact will be uneven across sectors and assets. In the near term, returns will be more dispersed than usual. Advances in generative AI, automation and robotics are now translating into observable changes in how space is used – not just in data centres and logistics, but across offices, healthcare and retail. Performance will increasingly depend on whether assets are aligned with technology enabled growth or exposed to efficiency driven footprint reduction.
Theme insights
01
Where technology makes activity cheaper and demand is elastic, and where the activity must occur physically, total space demand expands (Jevons paradox). Where activities can migrate online and demand is inelastic, efficiency translates into less space, not more.
02
Technology is accelerating divergence within sectors: modern, high‑spec logistics outperforms legacy stock; premium, collaborative offices remain resilient while back‑office markets weaken; experiential retail and flexible healthcare assets benefit from physical presence being core to value.
03
Investment in technology is already reshaping how work is done. Office is the sector most directly tied to headcount, demand in logistics, data centres, and industrial tracks activity and throughput, not employment. For real assets, this means shifts in demand across sectors rather than aggregate contraction.
The Dexus take
Technology is creating divergence within sectors, not just between them. Hold premium office where collaboration anchors tenants to physical space. Avoid back-office-dominated markets exposed to footprint reduction. Favour modern logistics that can accommodate automation. Living sectors offer technology-defensive income.
Productivity pays: Efficiency gains to reshape real asset demand
If productivity growth accelerates, through technology, policy reform or both, investors must reposition for a fundamentally different returns environment. Yield compression, a central driver of returns in the 2010s, won't repeat. Income growth from rising rents and occupancy will do the heavy lifting instead. The winners will be assets with pricing power and development optionality, not bond-like income streams. The investors positioning for this environment are already visible.
Theme insights
01
A higher productivity growth world is also a higher rate world. However a productivity-driven recovery also delivers stronger tenant demand, firmer rents and growing net operating income.
02
Higher growth means higher returns across the board. Illiquid markets become more liquid - smaller commercial properties, niche assets, regional deals that previously traded infrequently because the transaction costs were disproportionate to the deal size.
03
The assets in which returns grow alongside the economy will outperform those with fixed income profiles. Development rights and expansion capacity become more valuable, and are more likely to be exercised, when demand is rising.
The Dexus take
A productivity recovery shifts the return engine from cap rate compression to income growth and lifts the neutral rate. Favour equity over fixed income and active over passive strategies. Rising real incomes expand discretionary spending, benefiting experiential retail, entertainment infrastructure and convenience-oriented formats.
Era of dispersion: Asset selection has rarely mattered more
Pricing dislocations are creating actionable opportunities across Australian property. Sydney premium core offices command a higher rental premium vs. other CBD sub-markets than ever before. Industrial yield compression has eliminated the risk buffer for secondary warehouses just as vacancy is rising. Neighbourhood retail yields have, for the first time on record, eclipsed regional shopping centres. Whether these spreads widen further, stabilise, or revert will shape relative performance across sectors.
Theme insights
01
Sydney A-grade CBD office offers relative value for investors comfortable with leasing risk. Premium Core availability is tightening, and occupiers priced out of top-tier space will look to well-located alternatives. The rental discount to Premium has never been wider, yet many A-grade buildings sit in equally strong locations. Core-plus investors with leasing capability can capture that spread.
02
Regional retail yields imply ongoing structural challenges, most of these challenges have been resolved. Department store closures have been absorbed, discretionary tenants have stabilised, and remixing exercises are largely complete. Pricing may not reflect current fundamentals.
03
Secondary industrial requires caution despite superficially attractive yields: The yield cushion that historically compensated for tenant and obsolescence risk has compressed to half its long-run average. With vacancy rising and occupiers increasingly selective, that premium needs to rebuild before secondary warehouses offer adequate compensation for the risks involved.
The Dexus take
Pricing dislocations across office, industrial and retail have opened spreads not seen in a generation. Sydney A-grade CBD offers relative value as premium availability tightens. Secondary industrial yield cushions have compressed to half their long-run average. Regional retail pricing may not reflect the sector’s operational recovery. Deep market knowledge separates opportunity from trap.
Message to investors
"As we move through 2026, opportunity across real assets is broadening, but outcomes will be far less uniform. Dispersion is increasing. The gap between winners and losers is widening, even within the same sector. In this environment, asset selection matters more than it has in years, and the difference between owning the right assets and the wrong ones will be decisive".
– Ross Du Vernet, Group Chief Executive Officer & Managing Director
Authors
Jonathan Hedger
Chief Investment Officer
James Melville
Research Manager
Mia Kasalo
Research Analyst
Jonathan Hedger
Chief Investment Officer
James Melville
Research Manager
Mia Kasalo
Research Analyst
Profile Details
Jonathan Hedger
Chief Investment Officer
Jonathan Hedger
Chief Investment Officer
Jonathan Hedger is Chief Investment Officer (CIO) at Dexus with responsibility for strategy, corporate transactions, research and investment management of the Dexus balance sheet portfolio.
He has more than 15 years of experience in the real estate and investment banking industries across strategy, mergers and acquisition, investment management, equity and debt financing, as well as research. Prior to Dexus, he held roles with Deutsche Bank AG and Jones Lang LaSalle.
Jonathan holds a Bachelor of Commerce (1st Class, Hons) from the University of Auckland.
Profile Details
James Melville
Research Manager
James Melville
Research Manager
Profile Details
Mia Kasalo
Research Analyst
Mia Kasalo
Research Analyst
Key contacts
Jason Howes
Executive General Manager, Fund Capital & Product Development
Jason Howes
Executive General Manager, Fund Capital & Product Development
Natalie Tan
Head of Institutional Capital
John Taylor
Head of Private Capital
Mayen Takakura
Senior Manager, Institutional Capital
Brian Kwon
General Manager, Distribution - Asia
Profile Details
Jason Howes
Executive General Manager, Fund Capital & Product Development
Jason Howes
Executive General Manager, Fund Capital & Product Development
Jason Howes is Executive General Manager Funds Capital & Product Development responsible for the development and distribution of new funds products across the Dexus platform.
He has more than 25 years of experience in origination, capital raising and investment management in debt and equity investments across a range of assets classes. Prior to joining Dexus, Jason held roles at Macquarie Capital, Fortress Investment Group and Lone Star Funds.
Jason has a Bachelor of Economics from Macquarie University, a Master of Business Administration from University of Cambridge and qualified as a Chartered Accountant in Australia.
Profile Details
Natalie Tan
Head of Institutional Capital
Natalie Tan
Head of Institutional Capital
Natalie joined Dexus in July 2021 as the Head of Institutional Capital. Natalie is responsible for the creation and execution of the institutional capital strategy for Dexus’ Funds Management business across real estate and infrastructure. This includes the management of global institutional capital relationships, equity raising and marketing of new products to grow the Dexus platform. Natalie works with both Australian and international institutional investors to best invest their capital in the Australian real asset market.
Prior to her current role, Natalie was the Head of Investor Relations for Lendlease Investment Management where she was responsible for maintaining relationships with existing institutional investors and leading the investor relations team. Prior to this, Natalie worked within Lendlease’s Investment and Capital Markets team where she held responsibility for the structuring, analysis and marketing of any new wholesale investment products developed by Lendlease Funds Management.
Natalie has over 15 years’ experience in the property industry. Prior to joining Lendlease, Natalie had five years’ experience across financial accounting and analysis roles within Pricewaterhouse Coopers and Babcock & Brown. Natalie holds a Bachelor of Commerce from the University of New South Wales, is a member of the Institute of Chartered Accountants Australia and New Zealand, and holds a Master of Applied Finance from the Securities Institute of Australia.
Profile Details
John Taylor
Head of Private Capital
John Taylor
Head of Private Capital
Profile Details
Mayen Takakura
Senior Manager, Institutional Capital
Mayen Takakura
Senior Manager, Institutional Capital
Profile Details
Brian Kwon
General Manager, Distribution - Asia
Brian Kwon
General Manager, Distribution - Asia
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