Australian Commercial Property Sector Rebounds: High Rent Collection Rates Mark Return to Pre-Pandemic Stability

New Tenant Health Index from Re-Leased reveals that Australia’s commercial property sector has returned to robust rent collection levels, marking a full recovery from the pandemic-induced low of 67% in April and May 2020.

Re-Leased’s latest Tenant Health Index (THI) indicates renewed stability in Australia’s commercial property sector, highlighted by a strong rebound in rent collection rates, tenant retention, and rental income growth.

The Index assessed Australia’s Industrial, Hospitality & Leisure, Office, and Retail sectors, using live data from over 80,000 leases to provide comprehensive insights on sector health. The average rent collection rate across all sectors reached 99%, marking a significant recovery from pandemic lows and signalling cash flow stability across Australia’s commercial property market.

“While Industrial remains strong, we’re seeing softened demand in certain areas. Hospitality & Leisure is rebounding with robust tenant retention, and Office and Retail continue to navigate structural shifts, with occupiers paying premium rents for prime locations. After the turbulence of Covid, inflation, and the cost-of-living crisis, our data signals a strengthening for both landlords and tenants,” said Tom Wallace, CEO of Re-Leased.

Occupier retention rates, across all sectors averaged 78%, with Hospitality & Leisure showing the highest tenant retention at 83%, reflecting the bounce back of this sector.

The rent retention rate, which measures the rent paid by retained tenants compared to the previous year, averaged 86% across all sectors. Additionally, all asset classes showed a positive variance, highlighting how much more (or less) retained tenants are paying than in the previous year, which points to rental growth.

Retail presents a complex picture, leading the rent collection recovery with a rate of 98.62% — a significant rise from 54% in 2020. However, it also has the lowest tenant retention rate, alongside an 83% rent retention rate. This indicates that remaining tenants are paying more, with a notable lease-to-rent variance of 10.42%, likely due to rent increases, larger spaces, or investments in premium locations. This trend highlights a segmentation within retail: prime tenants are absorbing rising rents, while many traditional retailers face growing challenges.

The industrial sector remains resilient, showing an 86% rent retention rate overall. In high-demand precincts with limited supply, landlords are achieving solid rent growth as tenants compete for space. However, in areas where demand has softened, especially for larger warehouse spaces, rising vacancy rates are dampening rental gains off a high base. This variation underscores that landlords in areas with stable demand and low levels of supply are strategically positioned to maximise demand-driven growth, while others adapt to an environment with higher availability.

Office, despite a lower tenant retention rate of 76%, maintains a high rent retention rate of 85%, underscoring tenants’ willingness to pay a premium for quality spaces. Many of these occupiers are opting for smaller, premium spaces at increased rates, likely reflecting a “flight to quality” as tenants seek modern, flexible workspaces perceived as high-value or prioritise prime office locations that meet specific business needs.

Sector Data Highlights:

Read the full Tenant Health Index here.