Great retirement shift to supercharge commercial property

For decades, superannuation has been framed almost entirely as a growth story. Put money in, leave it alone, and let compounding do the work.

That framing is starting to change, because a growing share of the compulsory super’ pool is entering the phase where its main focus is no longer to grow. Its key role now is to pay an income.

Once super’ moves into that phase, many retirees look for an investment that provides yield, reliability and a predictable income stream, not just capital appreciation over time. Commercial property, with its long leases and contracted rent, is built for that.

Treasury’s 2026 Intergenerational Report shows the proportion of superannuation accounts sitting in the retirement phase is projected to more than double over the next four decades, from 11.6 per cent in 2025–26 to 25.5 per cent by 2065–66.

Superannuation drawdowns, meaning money paid out to retirees rather than reinvested, are projected to climb from 2.5 per cent of GDP to 5.8 per cent over the same period.

This means a much larger slice of the superannuation system needs to function as an income producing asset rather than a growth one.

There are already early signs of this shift. Self managed super funds (SMSFs), where trustees are disproportionately clustered in the cohort approaching, or already in retirement, offer a useful window into the trend.

ATO data shows non-residential property holdings within SMSFs rose from $71.8 billion in September 2020 to $120.1 billion by March 2026.

Some of that growth simply reflects the SMSF sector getting bigger overall. Non-residential property’s share of total SMSF assets moved more modestly over the same period, from around 10.3 per cent to 11.35 per cent.

Even accounting for that, the dollar increase is real, and it points in one direction; more demand for commercial property investment.

Supply not matching industrial demand

Industrial property is one area that investors have focused on, and for good reason. National industrial vacancy fell to 4.8 per cent in the June 2026 quarter, according to JLL, continuing a run of low vacancy that has stretched over many years.

Against a national stock of roughly 81.5 million square metres, JLL’s research showed only around 2.1 million square metres of new industrial space is under construction and due for delivery over the following 18 months.

That is a small addition against a market already stretched. Separate research from CBRE shows industrial and logistics transaction volumes in the first half of 2026 had already overtaken the total for all of calendar year 2025.

Much of the development pipeline beyond 2026 identified by CBRE also remains stuck in planning and approval, and pipelines stuck at that stage tend to slip rather than land on schedule.

None of this means commercial property is without risk. Vacancy in this sector has always run higher than residential, and pricing moves with the cycle, sometimes sharply. But the current picture is one where capital looking for income is growing faster than new supply is being delivered.

Healthcare property follows the same underlying logic. An ageing population needs more hospitals, clinics and specialist care, and that need does not rise and fall with the economic cycle the way demand for office space or retail floor space can.

Institutional capital appears to be taking notice. The broader living and alternatives sector, which includes aged care, recorded 93 per cent year on year growth to $2.0 billion in transaction volumes during the first half of 2026, according to CBRE.

Not all commercial property is equal. Any investor looking to this sector should understand the long term fundamentals for that market. If you intend to live off the income from your investments, the choice is critical.