Interest rate cuts renew investor confidence in commercial property

As the Reserve Bank of Australia delivers its second interest rate cut this year, confidence in commercial property investment is gaining momentum - particularly among those seeking stable income-generating assets in an otherwise volatile global landscape.

The move is seen by many as a potential turning point for the sector, following a period of subdued growth marked by inflation-driven rate hikes. For those looking to reposition capital, a unique window of opportunity is opening.

“During previous rate-cutting cycles, Australia’s commercial property market saw a sharp uptick in both income and asset values,” says Adrian Fiore, Managing Director and Founder of AGEM Property Group. “We believe the current market cycle offers an opportunity to get ahead of that curve.”

The income generated through commercial property investment, with assets quite often supported by leverage, is closely tied to interest rates. As borrowing costs fall, the potential for income and capital uplift increases.

At the same time, falling interest rates also signal lower returns from traditional safe havens like term deposits. As these become less appealing, investor appetite for alternative income-generating assets increases, creating greater competition, and in turn, upward pressure on property values.

“In Perth, demand for quality commercial property remains strong,” Fiore notes. “Even a modest shift in rental yields can significantly lift asset valuations, which makes now an excellent time to enter or deepen investment in the sector.”

Founded in 2012, AGEM Property Group has launched 38 unlisted commercial property funds, with its current passive income fund portfolio delivering an average internal rate of return (IRR) of 14.5%. The firm’s model centres on co-investment, with AGEM’s management and family maintaining a cornerstone position in every fund.

AGEM management and family currently hold 44% ownership across the portfolio - ensuring alignment of interests and fostering genuine partnership with co-investors.

“Unlike many firms, we don’t just manage the assets, we invest right alongside our clients,” Fiore explains. “When our investments perform well, we all share in the success. It’s a model built on trust, long-term thinking, and personal accountability.”

With geopolitical instability and economic uncertainty shaping global markets, the tangible nature of commercial property offers a level of stability that is increasingly attractive to investors. AGEM’s focus on essential services, including tenants in healthcare, childcare, and other non-discretionary sectors adds another layer of resilience.

AGEM Property Group’s Hillarys Plaza Passive Income Fund commenced in 2022. The asset’s resilient tenant mix includes childcare, medical and allied health services.

“We take a full-lifecycle approach to asset management,” Fiore says. “From acquisition to development and long-term tenancy, we’re deeply involved in ensuring every asset performs. That’s what allows us to deliver stable returns, regardless of the broader market environment.”

By operating through syndicate structures, AGEM also enables individual investors to access larger-scale properties, diversify their holdings, and participate in higher-value opportunities that would be difficult to achieve independently.

According to Fiore, the coming months represent a rare window for investors to act before the broader market adjusts to the new interest rate environment.

“While it can be tempting to delay investment decisions during times of uncertainty, the cost of waiting is often overlooked,” he says. “In high inflation periods, idle capital is losing value. The investors who fare best are typically those who act ahead of the curve.”

Investors entering the market during downturns or transitional moments often capture above average upside as the market corrects. AGEM’s rigorous due diligence and focus on long leases with tenants in essential and high-growth sectors aims to capture that upside while managing risk.

With interest rate cuts expected to continue and economic sentiment gradually improving, AGEM is launching a new investment structure tailored to emerging opportunities - building on the success of its past funds while responding to current market conditions.

“Given market conditions, in the coming months, we’ll be inviting co-investors to join us in the earlier stages of acquisitions,” Fiore says. “The format is specifically tailored to leverage the opportunities we see emerging in this phase of the cycle.”

At the heart of AGEM’s strategy is a long-standing commitment to values - particularly family, integrity, and partnership. It’s this foundation, Fiore believes, that sets the firm apart.

“We value family above all else, and we make time for what matters. Many of our investors are thinking not just about returns, but about freedom - how they spend their time, how they protect their future, and how they maintain quality of life,” he says. “Commercial property investment, when done well, enables all of that.”

To learn more about AGEM’s upcoming opportunities, visit agem.com.au