A selective year
Commercial construction through 2025 generally reflected a higher bar for project commitment. Activity continued, but decisions were more sensitive to feasibility, risk and financing conditions.
RICS reporting for Q1 and Q2 2025 showed private non-residential workloads in negative territory during those periods, while overall sentiment remained positive and expectations looking forward were stronger.[1][2]
Approvals data pointed to uneven conditions
The ABS January 2025 release showed a clear contrast between sectors: dwelling approvals rose, while the seasonally adjusted value of non-residential building approvals fell month-to-month.[3] Monthly approvals are volatile, but the direction matched what many in the market described through 2025: a cautious approvals pipeline in several traditional commercial categories.
Why feasibility mattered more in 2025
Commercial projects tend to be more sensitive to financing and demand certainty than smaller residential builds. In 2025, several factors continued to shape feasibility: cost and margin uncertainty, longer lead times, higher scrutiny of tenant demand and pre-commitment, and more conservative risk pricing.
RLB’s market update described a cautious environment, citing global instability and local constraints as contributors to delivery disruption, cost pressure, and dampened investment appetite.[4] ACIF’s May 2025 release also highlighted ongoing challenges including materials costs, planning delays, skills shortages, productivity issues and solvency risk.[5]
Where activity still held up
Even in a softer commercial year, some categories tend to continue where demand is structural rather than purely cyclical. ACIF’s May 2025 forecasts pointed to large data centre developments as part of the pipeline expected to support a future upswing in activity as conditions improve.[5]
Heading into 2026
Most commercial recoveries depend on feasibility becoming more predictable: finance settings, costs, approvals timelines and demand confidence. RICS survey reporting suggested expectations for the year ahead were stronger than contemporaneous workload readings, consistent with a market looking for clearer conditions before committing at scale.[1][2]
Sources
- RICS — Australia: Construction market holds steady in early 2025 (Q1 2025)
- RICS — Australia: Construction market continues on its steady 2025 path (Q2 2025)
- ABS — Building Approvals, Australia: January 2025
- RLB — Subdued outlook for Australia’s construction industry (Q2 2025 update)
- ACIF — May 2025 Forecasts Released (22 May 2025)