Winners and Losers of 2025: A Turning Point for Australian Property

After two years of momentum, 2025 proved to be a year of divergence for Australian-listed property. Shifting interest rate expectations, evolving investor sentiment, and sector-specific fundamentals created clear winners – and equally clear laggards – across the market.

The Losers: When Growth Met Reality

Data Centres: A Pause After the AI Surge
Data centre-linked property stocks were among the most notable underperformers of 2025. After benefiting from strong enthusiasm around global AI infrastructure investment in prior years, investor focus shifted toward capital intensity, return profiles, and execution risk.

As a result, major names retraced sharply, with Goodman Group (–12.3%), NextDC (–16.9%), and Digico (–34.6%) all delivering negative returns for the year. While the long-term demand story remains intact, 2025 marked a period of reassessment rather than outright rejection.

Industrial: Solid Fundamentals, Softer Returns
Industrial property fundamentals remained sound, supported by structurally tight supply and ongoing demand for logistics and warehousing assets. However, returns were weighed down by sector heavyweights, particularly Goodman Group, despite selective outperformance from names such as Centuria Industrial REIT (+23.6%). Momentum moderated as valuation sensitivity to interest rates came into sharper focus.

The Winners: Where Fundamentals Did the Heavy Lifting

Retail A-REITs: The Standout Performers of 2025
Retail property was the clear winner of the year. Supported by resilient operating metrics, improving consumer conditions, and favourable supply-demand dynamics, the retail A-REIT subsector delivered a standout total return of 27.8%.

Notably, every retail REIT within the A-REIT 300 outperformed both the broader property index and the overall equity market – a rare and decisive result that reinforced the sector’s recovery narrative.

Fund Managers: Beneficiaries of a Re-Opening Transaction Market
Listed fund managers enjoyed a resurgence as transaction activity accelerated alongside easing interest rate pressures. Strong inflows and improving deal flow translated into outsized returns, led by Charter Hall Group (+74.3%) and Centuria Capital (+20.3%).

Residential: Strength with Late-Cycle Moderation
Residential-focused property stocks also delivered solid gains, underpinned by population growth, housing undersupply, and rental strength. Stockland (+25.1%), Mirvac (+14.1%) and Ingenia Communities (+14.8%) led the charge. Momentum softened toward year-end as cash-rate expectations adjusted, but the structural demand story remains compelling.

Office: A Gradual Recovery Takes Hold
Office property continued its slow but meaningful recovery, delivering a positive return of 11.7% in 2025 – a significant turnaround from –7.3% in 2024. While performance remains subdued relative to other sectors, improving leasing conditions and stabilising valuations suggest the recovery is gaining traction.

Looking Ahead: Contrasting Forces in 2026

The outlook for 2026 is defined by tension between macro risks and strong underlying fundamentals. On one hand, the potential for interest rate hikes presents valuation headwinds for Australian property stocks. On the other hand, robust population growth and limited new supply across several sectors are creating favourable supply-demand imbalances that support income growth and capital values.

Retail and residential – particularly manufactured housing – remain the most attractive areas, where demand continues to outpace supply. While data centres faced headwinds in 2025, global demand remains strong, and we expect meaningful positive catalysts to emerge for the sector, particularly for high-quality operators, in 2026.

As the market begins to look beyond near-term volatility and toward 2027 earnings guidance, we expect free cash flow strength, balance sheet quality, and best-in-class asset portfolios to be key differentiators. Any interest-rate-driven market volatility may present attractive valuation opportunities for long-term investors.