Australian real asset markets are entering what we’re calling the “return of returns”, a phase in the cycle where not only do real assets represent relative value, but disciplined investors can capture even greater performance through active management by leaning into quality, location, and strategy.
Dexus’s Q4 2025 Australian Real Asset Review confirmed what many of us have sensed: the tide is turning. Following a period of contraction triggered by interest rate spikes and dislocation, relative value can be seen in all major real asset sectors, which is pretty unusual.
Historically, we’ve seen this pattern only twice in the past 35 years—post the 1994 recession and after the GFC in 2010. In both cases, total returns averaged 10% per annum over the subsequent five years. Today, projections suggest returns in the 7%–9% range over the next 12 months, supported by easing inflation, resilient business confidence, and a pivot toward private-sector-led growth.
Why this recovery is different
Compared to two years ago, initial yields are higher, demand is firmer, and new supply is constrained. This combination creates a powerful tailwind for performance. The looming shortage of prime assets means demand can shift significantly before it dents returns. For investors, this is not just a cyclical rebound—it’s a structural opportunity to reposition portfolios for growth.
Investor confidence is already lifting, as reflected in the Procore/Property Council Industry Sentiment Survey in September, which showed improved capital growth expectations across major sectors. GDP is forecast to grow, transaction volumes are rising, and deal flow is set to accelerate as clarity returns to pricing. Key indicators to monitor include vacancy trends, replacement costs and government policy shifts.
Three levers for outperformance
Moving forward, performance comes down to three things: market movement, asset selection, and value creation. On market movement: well located CBD office, dominant retail, and living sectors are well placed to ride this cyclical recovery, supported by growing undersupply driving rental growth and capital appreciation.
For asset selection, quality and location matter more than ever. Occupiers are gravitating toward premium assets in core locations with strong amenities and ESG credentials. Secondary assets will have their moment later in the cycle, but for now, core quality wins.
On value creation, construction costs remain elevated, so the first places to look for margin are industrial developments - where short build times mitigate risk - and living sectors, where government incentives are accelerating supply.
What is different about this cycle is that stock selection versus asset allocation is key and that means, choosing your assets very carefully. If you get the right assets and manage them well, double digit returns should not be a surprise.
In office you want a premium office building, in the best location. For retail you want a lifestyle centre which is going to benefit from the strong population growth.
For infrastructure you want assets which people are going to use into the future like purpose-built student accommodation. From a healthcare perspective you want investments which are going to benefit from the increased usage that Australia’s ageing population is going to require.
In industrial, it’s about looking at obsolescence and asking yourself do I have an asset, or can I buy an asset which is in a location which is going to benefit from the changing requirements of industrial assets going forward? Is my asset going to have a long commercial life which is going to allow you to get a return on that capital?
What's going to drive returns is also a move back into real assets. Currently, a lot of the large investors are underweight real assets and now that returns have started to turn positive, we're going to see them move back into the sector and returns will obviously move with it.
It does matter what asset you buy, but you can't always buy the assets you want. Generally, you have to buy what assets are available and at the moment there's a lot of prime assets available, which means that there's a lot of good opportunities for investors.
Positioning for the next phase
At Dexus, our strategy is clear: we harness scale, sector expertise, disciplined capital management, and the strength of our balance sheet to deliver sustainable returns and capture opportunities as the investment cycle enters its next phase.
For sophisticated investors, the imperative is simple: act decisively, prioritise quality, anticipate structural shifts, and deploy capital with conviction to capture the upside of this cycle. The greatest risk is hesitation.