Opportunity awaits in Darwin’s commercial market
Darwin’s commercial real estate market is set for growth, supported by infrastructure investments, demographic shifts, and its strategic role as Australia’s gateway to Southeast Asia.
As the capital of the Northern Territory, Darwin combines affordability, high yields, and government-backed initiatives that drive economic activity. Its prime location offers unmatched access to Southeast Asian markets, presenting unique trade and investment opportunities.
Economic policies from the new Territory Government are set to enhance Darwin’s role as a commercial hub, building on its affordability, high yields, and strategic access to Southeast Asia. These policies aim to attract investment, strengthen global trade links, and support key industries, reinforcing the city’s position as a gateway for business and economic growth. With strong fundamentals and high-yield property dynamics, Darwin presents a compelling opportunity for investors looking beyond traditional capital cities.
The economy
Darwin occupies a critical position in Australia’s economic framework, serving as a logistics and trade hub due to its proximity to Southeast Asia. The city’s economy is driven by infrastructure development, energy exploration, and defence investments, which are shaping its commercial property landscape.
The Northern Territory, for which Darwin constitutes the majority of its economic activity, recorded the highest gross state product (GSP) growth in Australia, growing at 4.6% over the 2023-24 financial year and the highest state GSP per capita at 3.6% respectively. Significantly outperforming other states which averaged 1.7% respectively.
At an industry level, the GSP numbers showed that mining (9.5%) led the rise driven by oil and gas extraction, coming off falls in the
previous year. Agriculture, forestry and fishing (9.9%) also rose driven by strength in livestock. Transport, postal and warehousing (6.2%) also rose with continued recovery in domestic and international air transport following the COVID-19 pandemic, partly offset by weakness in rail transportation with disruptions due to flooding. Construction (3.8%) increased consistent with private capital investment in non-dwelling construction.
Infrastructure
Major infrastructure projects include the expansion of Darwin Port, the upgrade of major road networks, and enhancements to broadband and telecommunications. The development of the Darwin International Airport has further bolstered connectivity, positioning the city as an attractive destination for global businesses and
investors. These investments have not only improved logistical efficiency but also attracted multinational corporations, particularly in the defence, renewable energy, and digital sectors.
Population and employment
Darwin’s population growth remains a key factor driving economic resilience.
The Northern Territory Government’s workforce development initiatives aim to equip residents with the skills needed to support emerging industries, such as renewable energy and defence contracting. This emphasis on creating a skilled labour force is critical to sustaining longterm growth across various sectors of the economy.
Challenges
High construction costs and labour shortages present challenges for real estate development. These issues are exacerbated by defence infrastructure projects that
divert resources from the private sector. However, the city’s affordability compared to other Australian capitals continues to attract investors seeking higher returns. Additionally, emerging solutions such as public-
private partnerships are being explored to alleviate these constraints, signalling innovative pathways to growth.
State Economic Growth (%yoy to June 2024)
The office market
Leasing overview
Darwin’s A Grade office market currently enjoys the second lowest vacancy rate in the country. According to the January 2025 Property Council Office Market Report, A Grade total vacancy was 5.3%, well below its ten-year average of 10.5%. This is being driven by a range of factors including increased take up by government at a State and Federal level, a lack of new supply, further constrained by rising construction costs and the underlying drivers of the NT economy broadly pointing in a positive direction.
A-Grade vs. B-Grade
Darwin’s office market is a critical component of its commercial property sector, with over 200,000sqm of space segmented into A-grade and B-grade spaces to cater to varying tenant profiles.
A-Grade Office: Highquality, modern spaces with advanced amenities and green certifications dominate this segment. Driven by federal government demand, rents have risen to $750 per sqm, with vacancy rates nearing zero. These spaces are characterised by longterm leases with tenants seeking high standards in both infrastructure and sustainability.
• B-Grade Office: Overflow demand from the A-grade market has boosted the B-grade sector, with rents rising to $450 per sqm. Small and medium enterprises (SMEs), including legal firms, accountants, and not-forprofit organisations, are the primary tenants in this segment. Incentives such as rent-free periods and fit-out contributions are becoming less prevalent as leasing conditions improve.
C-Grade Office: C-grade offices face significant challenges, with vacancy rates hovering around 50%. However, many landlords are repositioning these assets, upgrading them to B-grade standards or converting them to residential uses. These efforts are expected to reduce vacancy rates over time and stabilise this segment.
Sales performance
The sales market for office assets in Darwin remains stable but is projected to grow as leasing dynamics improve. Interstate investors are increasingly drawn to Darwin’s relatively affordable prices and attractive yields.
Key Trends
1. Hybrid Work Models: Businesses are adapting to flexible work arrangements, increasing demand for co-working spaces and hybrid leasing solutions.
2. Sustainability: Tenants are prioritising buildings with energy-efficient features, particularly government tenants, driving landlords to invest in retrofitting older assets to attract higher quality, long term covenants.
3. Repositioning: The conversion of underperforming C-grade spaces into residential or higher-grade offices is reducing overall market vacancy. This may have application in the student accommodation sector long term, due to the severe lack of accommodation options for university students.
Strata office market
Overview
The strata office market in Darwin remains a niche yet resilient segment, appealing to investors seeking alternatives to residential properties. City fringe locations are particularly popular due to their accessibility and parking availability.
• Sales Rates: $3,500 to $4,500 per sqm.
• Yields: Sub-$500k investments yield 7% to 7.25%, while properties above $1 million yield approximately 8%+.
Investment Drivers
Interstate investors are the dominant buyers in the strata office market, drawn by its affordability and steady returns. Limited supply and stable demand have kept prices consistent, while boutique office assets continue to attract niche buyers. The lack of new developments in this sector further supports pricing stability.
The market’s stability makes strata office investments an appealing choice for selfmanaged super funds (SMSFs) and private investors looking
to diversify their portfolios. Relative to interstate markets, where strata office yields typically range between 5% to 7%, Darwin offers attractive returns with replacement cost upside. The high yields and relative affordability of these assets add an additional layer of attractiveness in comparison to the residential market where yields average less than 5%.
Strata office market metrics
Industrial market
Prime vs. Secondary
Darwin’s industrial sector is experiencing robust growth, driven by its strategic importance in logistics, defence, and energy. Tenant demand is strong across both prime and secondary markets:
• Prime Industrial: Highquality facilities catering to logistics, resources, and defence projects dominate this segment. Rents have climbed to $180 per sqm, with properties like 1 Andrews Street showcasing the strong appeal of modern, compliant facilities.
• Secondary Industrial: Older facilities lease at $90 to $110 per sqm but often face longer vacancy periods due to their outdated specifications. Nonetheless, speculative developments are starting to emerge as developers aim to meet rising demand.
Market drivers
1. E-Commerce: The rise of online retail has significantly increased demand for warehousing and logistics facilities, post COVID supply chain challenges have fuelled the demand for storage
facilities to ensure future fulfillment gaps are more secure.
2. Defence and Energy: Large-scale defence projects and renewable energy initiatives are key growth drivers.
3. Infrastructure Upgrades: Improved connectivity has enhanced the appeal of industrial areas near transport hubs.
Industrial land market
The industrial land market is marked by high demand for serviced lots, particularly in areas like Berrimah. Lot sizes between 1,500 and 3,000 sqm are the most sought-after by investors, with sale prices ranging from $230 to $270 per sqm respectively.
Development Trends
Rising construction costs have delayed some projects, but strong rental yields are making
the economics of industrial more viable and are likely to drive new developments in 2025. Developers and owneroccupiers are increasingly active in this market, leveraging attractive prices to expand their operations.
The high demand for central locations is leading to innovations in land use, with mixed-use industrial zones becoming more prevalent to accommodate both logistics and light manufacturing
needs. These zones offer flexibility for tenants and support Darwin’s evolving economic priorities.
Retail market
The retail sector in Darwin faces macroeconomic challenges, yet suburban shopping centres and strip retail locations remain resilient. Retail tenants are trending back towards strip malls, where rents are significantly lower than their shopping centre counterparts. Strong local economic growth, low unemployment and rising wages driven by resources and construction demand provide supportive demand conditions, however rising household costs and inflation has seen the tenancy mix of retail tenants shift towards services such as medical, government and the like, as small retailers struggle to remain profitable.
Performance Metrics
• Shopping Centres: Rents range upto $1,000 per sqm, supported by tenant growth in the services sector, away from traditional fashion and food retail.
Strip Retail: Rents range from $300 to $400 per sqm, attracting costconscious tenants and entrants into the retail market.
Trends
1. Service-Oriented Retail: Healthcare, personal services, and dining options drive foot traffic in retail centres.
2. Affordable Locations: Lower rents in strip retail areas are attracting SMEs and startups.
3. Experiential Retail: Retailers are integrating lifestyle and entertainment elements to boost customer engagement.
The integration of retail with other asset classes, such as residential and office developments, is creating vibrant mixed-use precincts that appeal to both tenants and customers.
Student Accommodation Commercial market outlook
The student accommodation sector in Darwin’s CBD faces a significant supply shortage. International investors from North American and Europe are exploring opportunities to address this gap, focusing on proximity to educational institutions and transport links.
Investment Potential
Student housing offers attractive returns, driven by the growing number of international and domestic students. Mixeduse developments that incorporate retail, residential, and recreational components are particularly appealing. This is in line with the national trend that shows on a per capita basis, Australia is woefully undersupplied.
Darwin’s commercial real estate market is positioned for stable and robust growth in 2025, underpinned by strong economic fundamentals and strategic investments.
The growing focus on student welfare is also influencing the design of new accommodations, with features such as communal study spaces, fitness facilities, and sustainable construction practices becoming standard. However, mooted changes to student visa rules by the Federal Government will lead to a more cautious investment landscape in the lead up to the election, expected in the first half of 2025.
• Office market resilience: A-Grade office spaces continue to lead, with record-high rents and near-zero vacancy rates driven by demand from government and corporate tenants. Upgrading C-Grade assets to meet modern standards is reducing oversupply and opening opportunities in the student accommodation sector.
• Industrial expansion: Demand for industrial facilities remains strong, supported by growth in e-commerce, defence projects, and energy initiatives. Prime facilities are achieving higher rents, while land sales in strategic locations like Berrimah are attracting both developers and owner-occupiers.
• Retail opportunities: Suburban shopping centres and strip retail locations remain resilient, driven by service-oriented tenants such as healthcare and dining. Mixeduse developments are enhancing retail precincts, creating vibrant hubs that cater to both tenants and consumers.
Darwin’s strategic location as Australia’s gateway to Southeast Asia, combined with population growth and governmentbacked infrastructure projects, solidifies its appeal to investors. High yields, affordability, and diversification potential make Darwin a compelling market for those seeking stable returns and long-term growth. As challenges like construction costs and labour shortages are addressed through innovative solutions, Darwin’s commercial market will continue to evolve and thrive in the years ahead.
