Commercial property investment has always offered better yields than residential. But after the May 2026 Federal Budget, the gap between the two became even wider — in commercial property's favour.
Here's what investors need to know right now.
Why Commercial Beats Residential in 2026
The May 2026 Federal Budget abolished negative gearing on established residential property for purchases made after 12 May 2026 (taking effect 1 July 2027). Commercial property is fully exempt from these changes. You can still negatively gear a warehouse, office, or retail shop regardless of when you buy.
That's a structural shift. Investors who would have bought residential property are now looking at commercial — and Melbourne's western suburbs is exactly where that capital is landing.
The Numbers That Matter
Yield is how commercial property is valued.
A simple way to think about it: if a warehouse earns $100,000 per year in rent and you buy it for $1,600,000, your gross yield is 6.25%. Current yields in Melbourne's western suburbs:
- Prime industrial (Truganina, Derrimut): 4.5–5.5% net
- Secondary industrial (Laverton, Altona): 5.5–6.5% net
- Retail (Footscray, Sunshine): 5.0–6.0% net
- Office strata (Williams Landing): 5.5–6.5% net
These yields are materially higher than what most residential investment delivers.
WALE: The Metric That Tells You How Safe Your Income Is
WALE (Weighted Average Lease Expiry) tells you, on average, how many years are left on your tenant's lease. A WALE of 5+ years means your income is secure. A WALE of 1–2 years means you may need to find a new tenant soon. When buying a tenanted investment, always check WALE first.
SMSFs and Commercial Property in 2026
SMSFs remain one of the best vehicles for commercial property investment. Crucially, the May 2026 Budget confirmed SMSFs are excluded from the negative gearing changes. Business owners who have their SMSF purchase the premises their business operates from — paying market rent back to their own super fund — retain all existing tax advantages. This structure remains highly effective.
The CGT Change You Need to Know About
From 1 July 2027, the 50% CGT discount on assets held 12+ months will be replaced with cost-base indexation plus a 30% minimum tax on capital gains. This applies to commercial property. For most long-term investors, indexation will produce similar or better outcomes than the 50% discount over longer holding periods. But talk to your accountant before making decisions around timing.
Victoria's CIPT: What It Means When You Buy
When you buy commercial or industrial property in Victoria now, you pay stamp duty one final time. After that, no further stamp duty — ever — on future sales of that property. An annual property tax (CIPT) kicks in 10 years later, based on unimproved land value. The Victorian Budget confirmed this reform continues unchanged.
→ Explore industrial investments: Truganina, Derrimut & Laverton
→ Explore retail investments: Footscray, Sunshine & Werribee
→ Explore office investments: Williams Landing, Tarneit & Melton