Insights
AI Impact Scenarios: Australia
How AI could reshape Australian commercial real estate over the next decade.
Artificial Intelligence (AI) has the potential to reshape the Australian economy in much the same way as previous transformational technologies, including electricity, computing and the internet. Its impact on commercial real estate, however, is unlikely to be immediate or uniform. Instead, change will occur progressively, with different sectors, cities and asset classes responding at different speeds.
Rather than attempting to predict how AI technology itself will evolve, this research explores how AI adoption could influence Australia's economy and, in turn, commercial real estate performance. Using a scenario-based approach, we examine the potential impacts on:
- Productivity, economic growth and interest rates
- Employment trends and occupier demand
- Vacancy, absorption and sector performance
- Capital markets and investment behaviour
- City, asset and geographic performance
Why This Matters
The future of commercial real estate won't be determined by AI alone, but by how productivity gains translate into business growth, employment, investment decisions and demand for space. By modelling a range of plausible scenarios, this research provides occupiers and investors with practical insights to help navigate an increasingly dynamic market. These dynamics are tracked in real time by our Australian AI Impact Barometer.
AI Impact Study
Our approach was to model AI's impact through a chain of transmissions.
Key Takeaways
AI Creates Different Outcomes
AI won't affect every city, sector or asset equally. Instead, it will create varying outcomes across markets, property types and investment strategies.
Office Sees the Greatest Change
As a result of the exposure to white-collar employment, office markets are expected to experience the widest range of outcomes, with demand increasingly shifting towards high-quality, flexible and well-located space.
Industrial & Retail Respond Differently
Industrial and retail are influenced more by productivity, consumer demand and operational efficiency than direct workforce disruption, making them more resilient across scenarios.
AI's Impact Will Take Time
The effects of AI will emerge gradually as productivity gains flow through employment, investment and demand for commercial real estate.
AI Scenarios
Four Possible AI futures
The research models four internally consistent scenarios, each reflecting a different combination of AI adoption, productivity, labour-market outcomes and macroeconomic conditions.
Baseline Scenario: Incremental and Uneven AI Adoption (Highest Probability)
- Gradual AI diffusion across industries
- Productivity gains absorbed through efficiency rather than hiring
- Modest uplift to GDP growth without inflationary response
- Subdued near-term office demand before a later upswing; relative stability in other sectors
Implication: CRE demand recovers unevenly, with prolonged and gradual office adjustment.
Upside Scenario: Productivity-Led Expansion
- Faster AI diffusion and monetization
- Stronger GDP growth, innovation and job creation
- Earlier and more durable demand for high-quality, flexible office space
- Reinforced strength across logistics & industrial, retail and multifamily/living
Implication: AI accelerates a higher-quality, more selective CRE recovery.
Downside Scenario: AI Bust
- Overinvestment followed by financial tightening
- Delayed translation of productivity into demand
- Substantial growth slowdown accompanied by cyclical layoffs
- Prolonged office vacancy and cyclical softness across sectors
Implication: CRE stress is driven by broader financial conditions and timing, not technology failure.
Downside Scenario: AI-Driven Labor Displacement
- Productivity gains realized through labor substitution
- Subdued revenue growth and constrained aggregate demand
- Meaningfully higher unemployment with no effective policy response
- Structurally elevated office vacancy
Implication: Office demand remains impaired, with muted spillovers elsewhere.
Explore the Research Your Way
Navigate the report via the links below to explore the areas most relevant to you.For Occupiers
How could AI change workplace strategy, portfolio planning and future space requirements?
For Investors
How could AI influence asset selection, investment performance and long-term returns?
By Australian City
See how local industry structure and economic conditions could influence outcomes across Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra.
By Property Sector
Explore scenario implications for Office, Logistics & Industrial and Retail.
Impact on CRE
Key findings for Australian Commercial Real Estate by Asset Type
What the scenarios mean for Australian cities
The broad scenario trajectories are national, but the impact differs by city as AI interacts with local industry mix, population growth, investment pipelines and public-sector exposure.
Sydney
Australia's AI bellwether
Sydney has the greatest concentration of financial and professional services among the capitals. Its workforce composition means the scenarios are likely to become visible here earlier, making the labour market an important signal of which path is unfolding.
Melbourne
Growth supported by scale and diversity
Melbourne is the fastest-growing capital in the baseline, supported by strong population inflows and a broad industry base spanning professional services, education and advanced manufacturing.
Brisbane
Infrastructure provides a demand floor
Interstate migration and the 2032 Olympic Games construction pipeline support growth and help moderate downside outcomes through the end of the decade.
Perth
Resources provide a countercyclical buffer
Perth enters the forecast with strong momentum. Resources demand and mining-sector office employment provide resilience, including in the displacement scenario.
Adelaide
A more stable trajectory
The AUKUS submarine program and defence procurement provide a long, predictable demand pipeline, resulting in relatively narrow variation across the scenarios.
Canberra
Government exposure changes the pattern
Canberra is anchored by Commonwealth employment and shows the steadiest baseline growth profile. Government functions related to regulation, displacement response and crisis management can provide countercyclical support.
Insight to Action
From Insight to Action
The scenarios are designed to support decisions, not simply describe possible futures. The practical actions below provide a starting point for occupiers and investors as AI adoption evolves.
For Occupiers: Focus, Flex, Futureproof
Watch the barometer
Track utilisation signals and watch for inflection points. View the Australian AI Impact Barometer here.
Recut demand planning
Map changing workflows to space requirements.
Build option value
Use flexibility, break options and expansion rights to preserve choices.
For Investors: Reprice, Reweight, Reposition
Underwrite adaptability
Price capex, reconfiguration and upgrade headroom into investment decisions.
Focus on the reversion
Stress-test rents, downtime and exit liquidity.
Stage capital with options
Phase commitments, secure rights and retain capacity to respond as signals change.
The Team Behind the Report
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