Property investors have had plenty to think about in 2026.

Policy changes, shifting market conditions and a steady stream of headlines have caused some residential investors to pause. At the same time, commercial property is attracting more attention, particularly from investors looking for stronger cash flow or another way to diversify an established property portfolio.

So, is it time to move from residential into commercial?

That may be the wrong place to start.

In this episode of The Buy-In, Sevenfold residential property specialist Trent Cripps sits down with Nick Selbie, Director of Commercial & Advisory, to look at what is happening across both markets and, importantly, how investors should think about the role each can play.

A pause does not mean the strategy has stopped working

Residential property is cyclical, and different markets around Australia are currently sitting at very different points in that cycle.

Sydney and Melbourne have softened, while Brisbane and Perth have shown greater resilience. Even within individual cities, performance varies according to property type, location, buyer demand and other local factors.

That makes broad statements about “the Australian property market” increasingly unhelpful.

For an investor, a changing market is a reason to review the strategy rather than react automatically to the headline.

What are you trying to achieve? How long is your investment timeframe? What role does the property play in your portfolio? Has anything fundamentally changed about the reason you bought it?

Those questions matter far more than this week’s market commentary.

Where commercial property can fit

Commercial property can perform a very different job within a portfolio.

Residential investment has traditionally been used heavily for long-term capital growth. Commercial property can introduce stronger cash flow through rental income, longer leases and, depending on the lease structure, tenants contributing to property outgoings.

That can make commercial particularly interesting to investors who have already built equity through residential property and are considering the next stage of their strategy.

It also creates another layer of diversification.

Commercial property itself covers multiple sectors, including industrial, medical, office and retail. Each has different demand drivers, lease structures and risk characteristics, and they do not necessarily move through their cycles at the same time.

Nick explains that, broadly speaking, commercial property can lag residential cycles by one to three years. There are good reasons for that. Residential markets can respond relatively quickly to changes in interest rates and consumer confidence. Commercial property is tied to business activity and longer lease terms, so changes can take longer to flow through.

For an investor holding both, those differences can be useful.

The 7% yield does not tell you what the investment will actually return

One of the traps with commercial property is focusing too heavily on the headline yield.

A property advertised at a 7% yield can sound compelling, particularly when compared with residential rental returns. But yield alone tells you very little about whether the property is a good investment.

Nick uses a $1 million commercial property as a simple example.

Commercial lending may sit around a 60 to 70% loan-to-value ratio, depending on the property, borrower and lender. At a 70% LVR, an investor would need approximately $300,000 for the deposit.

Then come the acquisition costs.

Stamp duty, legal costs, due diligence, advisory fees and other expenses can add roughly another 5 to 6% of the purchase price in the example discussed.

Suddenly, the investor may have close to $400,000 committed to acquiring that $1 million property.

That changes the way the headline return should be viewed, particularly in year one.

It does not make the investment unattractive. It simply means the real numbers need to be understood before making the decision.

In commercial property, the lease matters enormously

A commercial property is more than the building and the land underneath it.

The lease can be a significant part of its value.

Consider a property with a quality tenant, a longer lease and annual rental increases. As those increases compound over time, the income generated by the asset increases. That can influence the property’s value as well as the investor’s cash flow.

It is one reason commercial property is generally better considered as a medium to long-term investment.

It also explains why two apparently similar properties can represent very different investments.

Who is the tenant? How strong is their business? How much time remains on the lease? What are the annual increases? Who pays the outgoings? Is the current rent at market value? What happens if the tenant leaves?

These details matter.

Secure income or an opportunity to add value?

Nick describes two broadly different approaches to commercial investment.

The first is buying security.

An investor might purchase a property with a strong tenant already in place on a long lease. Competition for that security can mean paying a higher price and accepting a lower yield, but the trade-off is greater certainty of income.

The second is buying opportunity.

A vacant property, a short lease or a property with rent below market value may offer considerably more potential for uplift. Secure a tenant, renegotiate a lease or bring the rent closer to market and the property’s income, and potentially its value, can change significantly.

That opportunity comes with additional risk.

Neither approach is automatically better. The appropriate one depends on the investor’s goals, capacity, timeframe, experience and appetite for risk.

How much do you need to invest in commercial property?

There is no single entry point.

At lower price points, investors may be dealing with smaller properties, shorter leases and smaller local businesses as tenants. Moving higher can provide access to larger assets, longer leases and stronger tenant covenants, although the increased security may also mean accepting a lower yield.

Price alone does not determine quality.

A smaller commercial property can still be an excellent investment if the tenant, lease, location, demand and underlying property fundamentals stack up. A more expensive property does not become a good investment simply because a large tenant occupies it.

The better question is not, “How much do I need to buy commercial property?”

It is, “Given my capacity, what are we trying to achieve?”

Moving from residential to commercial

For many investors, commercial property becomes relevant after residential property has already done some of the heavy lifting.

They may have substantial equity in their home, one or more residential investments and sufficient borrowing capacity or capital to consider another asset class.

That does not mean the next purchase automatically needs to be commercial.

Before looking for a property, Nick’s starting questions are straightforward:

What are you trying to achieve?

Is the priority income? Diversification? Building wealth for retirement? Creating a stronger overall cash flow position?

What is the timeframe?

Five years creates a very different strategy from ten or twenty.

What capacity do you have?

Commercial generally requires more capital upfront, so the financing position needs to be understood before searching for an asset.

Only then does the conversation move towards what to buy.

That order matters.

Residential versus commercial is not really the question

There is plenty of interest in commercial property right now. There may also be opportunities emerging in residential markets where other buyers have become hesitant.

Neither is a reason to chase whichever market currently looks more attractive.

Residential and commercial property have different characteristics. They can produce different combinations of growth and income. Their cycles behave differently. Even within commercial property, medical, industrial, office and retail assets can respond differently to changing economic conditions.

Used deliberately, those differences can make a portfolio more resilient.

The important part is knowing why each asset is there.

For some investors, that may mean continuing to build a residential portfolio. For others, commercial property may provide the cash flow or diversification they now need. For some, the right answer may involve both.

The property comes after the strategy.

Watch the latest episode of The Buy-In to hear Trent Cripps and Nick Selbie unpack residential and commercial property in 2026, including the numbers behind a $1 million commercial purchase, how commercial leases create value and what investors should consider before making their next move.

General information only and not financial, tax, credit or investment advice. It does not consider your personal circumstances. Figures are illustrative examples only and are not a guarantee of returns. Seek professional advice before acting.