Australia’s commercial property market is showing early signs of momentum again. Higher interest rates and subdued investor confidence created a period of weaker conditions. But as inflation stabilises and global sentiment improves, conditions are encouraging buyers back into the market. While this shift is positive for owners and investors, a rising market also increases the need to reassess how commercial assets are protected.
As values grow and activity lifts across industrial, retail and office assets, so do the exposures that influence long-term performance, insurability, and resilience.
A Changing Market Means Changing Risk
Industrial property is still the strongest performer, supported by demand for logistics, warehousing and manufacturing facilities. As consumer spending sustains, retail stabilises. And while office vacancy is still elevated in some CBDs, leasing activity is gradually improving
These shifts create new considerations:
- Higher property values mean higher reinstatement costs.
- Greater activity increases liability and operational risk.
- Vacancy in some segments can raise insurance scrutiny.
- Construction cost inflation continues to widen the underinsurance gap.
Growth is welcome but it also highlights the importance of ensuring insurance programs and risk controls reflect the current market, not last year’s conditions.
The Key Issues for Commercial Property Owners
Reinstatement Costs Rising
Materials and labour remain significantly more expensive than pre-2020 levels. Owners are exposed to substantial shortfalls in the event of a total or large partial loss, due to many commercial properties still being insured at outdated values. To maintain adequate cover, annual professional valuations are increasingly important.
Asset Resilience and Climate Exposure
Weather-related losses are becoming more frequent and more costly across industrial estates, retail centres and office buildings. Roof integrity, drainage infrastructure, fire systems and electrical components are key in reducing vulnerability. To marginally improve claim outcomes and insurer appetite, proactive maintenance and resilience upgrades are beneficial and recommended.
Tenant Mix and Operational Risk
Tenant profiles can shift quickly as markets recover. Diverse occupancy, higher foot traffic, and changes to building use all influence liability exposure. Clear lease agreements, up-to-date compliance documentation and regular communication with tenants help strengthen risk management and reduce disputes during a claim.
Due Diligence Expectations Are Increasing
Transaction volumes are lifting globally, and Australia typically follows this trend. Purchasers, lenders and insurers are placing more value on documented maintenance, engineering reports, valuations and risk assessments. Well-prepared properties are more attractive, easier to insure and better positioned for efficient settlement.
Strengthening Your Protection Strategy
To stay ahead of the market, commercial property owners should prioritise:
- Annual review of sums insured
- Regular building inspections and risk engineering assessments
- Improved climate resilience and preventative maintenance
- Updated tenant and lease risk controls
- Early engagement with brokers during acquisition or refinancing
The Bottom Line
Opportunity and rising responsibility follow a rebounding market. As commercial property values and activity increase, so does the need to ensure assets are accurately valued, well-maintained and properly protected. Taking proactive steps now can help owners capture the upside of market improvement, while reducing the likelihood of unexpected costs or coverage gaps.
