This week, Treasurer Jim Chalmers handed down the 2026-27 Federal Budget. The WA State Government delivered its own shortly before. Together, they paint one of the most compelling pictures for Western Australian commercial property in recent memory.
At Sterling Property, our view is clear: the commercial property case in WA has rarely been stronger, and for residential investors in particular, the numbers now warrant a serious conversation.
WA in a unique position
Western Australia entered this budget week from a position of genuine fiscal strength. It is worth understanding that context before unpacking what either government has announced.
“What stands out immediately is the scale of what’s been committed,” says Neo. “WA just delivered its eighth consecutive budget surplus. The State’s Asset Investment Program is now $44.3 billion over four years. That’s not incremental. That’s transformational.”
The numbers back it up. WA holds AAA credit ratings from both S&P Global and Moody’s. It carries the lowest net debt-to-GSP ratio of any state in the country. Iron ore, gold and lithium royalties are expected to deliver over $10 billion in the current financial year alone.
For commercial property investors, the relevance is direct. A government spending at this scale, across health, transport, energy, housing and defence, generates sustained demand for commercial floor space. Engineering firms, consultants, project managers, healthcare operators, logistics providers.
That demand is already visible in the leasing market and it is going to deepen as the spend flows through.
The Residential Investor Equation Has Changed
Before covering specific sectors, it is worth addressing the Federal Budget measure that has the most direct implication for where private investment capital is likely to flow next.
From Budget night, negative gearing on established residential properties has been restricted. Losses on established investment properties can no longer be offset against wages or other income. From 1 July 2027, the 50% capital gains tax discount will be replaced with cost-base indexation and a 30% minimum tax on real gains. Family trusts face a new 30% minimum tax on distributions from 2028.
Commercial property is explicitly exempt from the negative gearing changes. For investors holding through superannuation, the CGT position is untouched.
“What we’re already talking to investors about,” says Neo, “is the shift in the after-tax return comparison between residential and commercial. For a private investor in an established residential property, the equation just changed materially. For a commercial investor, particularly one holding in super, very little has changed. That gap is going to become increasingly obvious.”
Perth commercial property is already offering competitive net yields alongside longer lease terms and stronger tenant covenants. Add a tax environment that has not been adversely impacted by this Budget, and the case for reallocation is not a marginal one. For residential investors reassessing their position, commercial deserves genuine consideration.
Three Sectors Standing Out
Office: CBD Pressure Creates Fringe and Suburban Opportunity
Perth’s office market is experiencing conditions with no modern precedent. The Property Council’s February 2026 Office Market Report confirmed three consecutive years of zero new CBD supply. Vacancy is falling. Incentives are softening. CBRE is forecasting at least 25% rental growth across the Perth office market over the next five years.
That pressure in the CBD is creating real momentum in fringe and suburban office markets, which is where Sterling Property operates most actively.
“When CBD rents tighten and incentives dry up, tenants start looking at alternatives,” says Neo. “West Perth, Subiaco, Nedlands, South Perth. We’re seeing genuine interest from businesses that would previously have defaulted to the CBD. The fringe and suburban office market benefits directly from CBD constraint, and we’re starting to see that translate into enquiry and lease activity.”
For investors, fringe and suburban office stock currently offers a more accessible entry price, stronger relative yield, and a tenant demand profile that is growing. The same infrastructure spending driving CBD demand, government agencies, professional services, defence-adjacent businesses, is spilling outward. The window to position ahead of that is open now.
Industrial: AUKUS and the Western Trade Coast Opportunity Corridor
The Western Trade Coast is shaping up as the most significant industrial and logistics corridor in the country, and the Federal Budget has hardened that case considerably.
The $12 billion committed to the Henderson Defence Precinct is the centrepiece. This is Australia’s primary naval shipbuilding and sustainment hub, anchored by the AUKUS submarine program. Bechtel has been appointed as master planner. Design contracts are under way. The precinct will require a surrounding ecosystem of defence contractors, advanced manufacturing operators, engineering services firms, and supporting logistics infrastructure that will take years to fill.
Add $552 million for Anketell Road, co-funded with the State to a combined $1.1 billion, directly connecting the precinct to Westport and the broader freight network. Add the State’s own $647 million Westport allocation. The combined infrastructure commitment to Perth’s south is without precedent.
“Kwinana, Henderson, Neerabup, Hazelmere. These aren’t speculative plays,” says Neo. “They’re backed by real infrastructure spend, real tenant demand, and supply that simply cannot keep pace. Perth industrial vacancy is sitting at 1.9% excluding sublease. Super-prime rents rose 6.5% in the March quarter. The investors who are moving now are positioning ahead of a pipeline that is going to feel very thin within two years.”
For investors, the AUKUS-driven Western Trade Coast is a multi-decade demand story that is just beginning to materialise.
Healthcare — A Capital Pipeline With No Precedent
The WA State Government has committed $9.1 billion to health over the budget period. The breakdown is significant: $5.5 billion in physical health infrastructure, 900 new hospital beds, the acquisition of Mount Lawley Hospital, the Albany Health Campus expansion, Bunbury Regional Hospital redevelopment and the Geraldton Health Campus.
For medical property investors, this is direct stimulus. Major public hospital expansion consistently drives demand for surrounding private medical infrastructure. Specialist suites, pathology, allied health, day surgery and consulting facilities cluster around hospital precincts. As public capacity grows, private operators follow.
Perth’s medical property sector is already tight on supply. The capital pipeline now underway will generate tenant demand that the existing stock cannot absorb. For investors with an appetite for long-WALE, government-adjacent income, healthcare real estate in WA warrants a close look.
What investors should be thinking about now
Sterling flags three considerations worth addressing before the end of 2026.
For private investors holding established residential property with significant unrealised gains, the timing of any sale now carries real weight. The CGT position before 1 July 2027 is materially better than what applies after. Getting formal advice on that calculation now, rather than in 12 months, is prudent.
For investors comparing residential and commercial returns with fresh eyes, the differential has widened. The after-tax case for commercial, particularly in the sectors and precincts covered above, is the strongest it has been in some time. That conversation is worth having with an adviser who understands both sides of the equation.
For anyone with an appetite for industrial land in Perth’s south, the window to acquire at current prices is narrowing. The infrastructure is committed. The tenant demand is structural. And the supply response is constrained by both land availability and construction capacity.
“This is a market where the fundamentals and the policy environment are pointing in the same direction,” says Neo. “That doesn’t happen often. When it does, the investors who move with conviction tend to benefit most.”
Both budgets delivered a clear signal for Western Australian commercial property. A state with genuine fiscal strength, a federal government committing record capital to WA’s south, and a residential investment environment that has just become measurably more complicated.
The commercial property opportunity in WA is well-supported, and the timing is relevant.
To discuss how this budget environment affects your investment position, commercial asset advisory or a confidential appraisal, contact Brian Neo directly.
