Japanese capital bets big on industrial before RBA's call

The week opened with Governor Michele Bullock reminding parliament that the Reserve Bank still has a decision to make, telling a panel on Friday that the board must judge whether its benchmark interest rate is at a level sufficient to restrain price pressures and return inflation to target, with the meeting itself just over a week away¹. That leaves the cash rate sitting at 4.35%² and the ten-year bond at 5.01%³ heading into the 29 September decision, and the banks are no longer reading from the same page — NAB expects a rate hike in September, forecasting a 25bp rise to 4.6%, while ANZ, CBA and Westpac all expect a rate hike in November instead, after annual inflation eased to 3.5% in July even as the trimmed mean measure the RBA watches most closely held at 3.6%². For property, that's the whole ballgame right now: borrowing costs stay elevated, credit spreads sit around 1.03 percentage points over swap for investment-grade property debt³, and every deal gets priced against a discount rate that refuses to fall.

Against that backdrop, the more interesting move came from offshore. Tokyo Tatemono has teamed with Charter Hall and UBS Asset Management to seed a new industrial vehicle with a $1.2 billion portfolio of east coast assets, marking the Japanese group's maiden Australian investment in the sector⁴, spanning warehouses in Sydney and Brisbane leased to the likes of Coles and Coca-Cola. It's a reminder that while domestic super funds filled most of the gap left by cautious foreign buyers through the first half of 2026, patient Asian capital hasn't given up on Australian sheds. Layer on Anthropic's long-term lease over the $32 billion data centre proposed for a site west of Brisbane, still subject to foreign investment approval⁵, and the alternatives and industrial corners of the market keep looking like where the real conviction is.

That lines up with where the numbers say value actually sits. Industrial remains the cheapest sector on our model, priced around a 5.40% cap rate against fair value near 6.04%, and carrying the strongest projected five-year return at 8.3% with the shallowest worst-case downside of -12%⁶. Retail sits at the other end, already the most expensive on the value ladder. With the RBA decision now the week's clear fixture, expect capital to keep hunting quality sheds and data infrastructure while everyone waits to see whether Bullock's board actually pulls the trigger.

In plain terms: right now the model likes Industrial best on value, and is most wary of Retail. Looking five years out, it expects Industrial to earn the most — about 8.3% a year — while Retail trails at roughly 6.4%. Why are property values under pressure? Because the ten-year government bond now pays around 5.0%. When something as safe as government debt pays that much, a building has to offer more to tempt a buyer — and that quietly drags values down. What's holding them up is the steady wave of overseas money still buying in — the one signal we've actually proven moves prices. The table below is that same picture, in numbers.

The numbers, by sector

A quick guide: "cap rate" is the yearly rent as a share of the price — like an interest rate on a building; a higher number means cheaper. "Fair value" is what our model says that rate should be given today's interest rates. "Worst case" is a bad-but-realistic five-year fall in value.

Cheapest to priciest, the order runs Industrial then Alternatives then Office then All Property then Retail. We hunt for value, not hype — the best long-run buys tend to be where the crowd has already sold off.

Independent research — we don't develop, invest in or broker property, and every figure is built from public data. How it's built →