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If you've heard "CPM" in the context of commercial property, you're mixing up advertising terms with real estate metrics. In advertising, CPM stands for cost per thousand impressions, but that doesn't apply to property sales. For commercial real estate, the correct metric is cost per square meter a pricing standard used in commercial real estate to calculate property value based on area in square meters. This metric is crucial whether you're buying, leasing, or investing in office, retail, or industrial spaces.
Why "CPM" is a Misnomer for Commercial Property
Many people confuse "CPM" with commercial property pricing because of the "per thousand" part. But in real estate, we don't use "per thousand" for property costs. Instead, we measure space in square meters and calculate price per square meter. For example, a 100-square-meter office in Melbourne CBD priced at $135,000 has a cost per square meter of $1,350. This is the standard way professionals evaluate property value. Using "CPM" here is like saying "how many apples are in a dozen" when you mean "how many oranges are in a crate"-it's the wrong unit entirely.
How Cost Per Square Meter Works in Practice
Imagine you're looking at a retail shop in Melbourne's Bourke Street Mall. The landlord quotes $2,200 per square meter. If the shop is 50 square meters, the total annual rent would be $110,000. This metric lets you compare spaces across different locations. A 30-square-meter office in Sydney CBD at $1,500/sqm costs $45,000 annually, while a 60-square-meter space in Brisbane at $1,100/sqm costs $66,000. Without using consistent units, you'd never know which is a better deal. The cost per square meter metric cuts through confusion and gives you a clear baseline.
Key Factors That Drive Commercial Property Prices
Not all commercial properties are priced the same. Location matters most. A warehouse in Melbourne's industrial suburb of Clayton might cost $450/sqm, while a similar space in the city center could be $800/sqm. Property type also plays a role. Retail spaces in high-traffic areas like Collins Street command higher rates than office spaces in the same area. Other factors include:
- Tenant demand: High demand for retail spaces in shopping districts pushes prices up. For example, Bourke Street Mall in Melbourne has retail rates 30% higher than nearby side streets.
- Building quality: Class A office buildings with modern amenities like smart HVAC systems or solar panels can charge 20-30% more than older buildings.
- Lease terms: A 10-year lease with fixed annual increases might cost less per square meter than a short-term lease with variable rates.
- Economic conditions: During economic downturns, industrial property rates in Melbourne dropped 15% in 2025, while retail spaces saw only a 5% decline due to essential business demand.
Current Market Rates Across Australia (2026)
| Property Type | Melbourne CBD | Sydney CBD | Brisbane | National Average |
|---|---|---|---|---|
| Office | $1,350 | $1,500 | $1,100 | $1,300 |
| Retail | $2,200 | $2,400 | $1,600 | $1,900 |
| Industrial | $450 | $500 | $350 | $450 |
These rates reflect 2026 data from CBRE Australia's quarterly report. For instance, industrial properties in Brisbane are cheaper because of high supply from new logistics hubs near the airport. Meanwhile, Sydney's retail spaces command premium rates due to tourism-driven foot traffic. Always check the latest reports before making decisions-prices shift quickly.
How to Determine if a Price is "Good"
A "good" price depends on your needs. For a coffee shop owner, a $2,200/sqm retail space in Melbourne's CBD might be worth it if it brings 500 daily customers. But for a startup, that same space could be too expensive. Here's how to evaluate:
- Compare to similar properties in the same area. If a retail space in Dandenong is quoted at $1,500/sqm while others nearby are $1,200, it's likely overpriced.
- Calculate return on investment. For example, if a $500,000 industrial property in Geelong generates $30,000 annual rent, the cap rate is 6%. A cap rate above 5% is generally considered strong for industrial assets.
- Consider future growth. A warehouse in Melbourne's west might cost $400/sqm today, but if a new freight rail line is planned nearby, it could jump 20% in two years.
Always ask for recent transaction data. In 2025, office spaces in Adelaide's CBD sold for $1,100/sqm on average, but a building with a 10-year lease from a government tenant sold for $1,400/sqm due to lower risk. Context matters more than raw numbers.
Common Mistakes People Make When Evaluating Prices
Many investors skip basic checks and end up overpaying. Here are pitfalls to avoid:
- Ignoring location nuances: A "prime" retail spot might be on a dead-end street with low foot traffic. Always walk the area during business hours to see actual customer flow.
- Forgetting hidden costs: A $300/sqm industrial lease might include council rates and utilities, while a $250/sqm quote could exclude them. Always clarify what's included.
- Overlooking market cycles: In 2024, office vacancy rates in Sydney hit 18%, pushing prices down. By 2026, they've dropped to 12%, but rates haven't fully recovered. Buying at the wrong cycle can cost you.
- Relying on outdated data: A 2023 report might say industrial rates are $400/sqm, but new warehouses in Brisbane have driven prices to $350/sqm by 2026. Always use current sources.
For example, a Melbourne business owner once paid $2,000/sqm for retail space based on a 2022 report. By 2025, similar spaces were $1,800/sqm due to new shopping centers opening nearby. They could've saved $20,000 by checking recent transactions.
Real-World Examples: What's a Good Price?
Let's look at actual scenarios:
- A tech startup in Melbourne needed office space. They found a Class A building at $1,450/sqm, while competitors paid $1,600/sqm. The difference? The startup negotiated a 5-year lease with fixed increases, while others signed 3-year terms with variable rates. The long-term stability made the higher price worthwhile.
- A small retailer in Sydney chose a $2,100/sqm space in a new shopping complex over a $2,400/sqm spot in a mall. Why? The new complex had 20% more foot traffic and lower management fees. The $300/sqm savings added up to $15,000 annually on a 50-square-meter space.
- An industrial investor bought a warehouse in Brisbane for $320/sqm in 2025. The area had low vacancy rates and a new freight hub opening in 2026. By 2026, the same space was valued at $400/sqm-a 25% increase in one year.
These examples show there's no universal "good" price. It's about matching the cost to your specific goals, location, and timing.
Is CPM used in commercial real estate?
No, CPM (cost per thousand impressions) is strictly an advertising metric. Commercial real estate uses "cost per square meter" (CPSM) for pricing. Confusing these terms can lead to serious miscalculations. Always verify the metric being used-real estate professionals never say "CPM" for property values.
What's a good cost per square meter for retail space in Melbourne?
Prime retail locations like Bourke Street Mall or Collins Street typically range from $2,000 to $2,500/sqm in 2026. For suburban retail areas like Chadstone or Fountain Gate, rates drop to $800-$1,200/sqm. A "good" price depends on foot traffic, tenant mix, and lease terms. A $2,200/sqm space in a high-traffic mall might be better value than a $1,800/sqm space in a quiet strip.
How do I compare office spaces across different cities?
Use the cost per square meter metric to standardize comparisons. For example, a $1,500/sqm office in Sydney might seem expensive next to Melbourne's $1,350/sqm, but Sydney's space could be 30% larger or in a better location. Always adjust for size, building quality, and location. Also, check vacancy rates-high vacancy (like Sydney's 18% in 2024) usually means lower rates, while low vacancy (Brisbane's 8% in 2026) drives prices up.
Why are industrial property rates lower than retail or office?
Industrial properties typically have lower rates because they serve specialized needs like storage or manufacturing. They don't generate the same foot traffic or prestige as retail or office spaces. For example, a warehouse in Melbourne's west costs $450/sqm because it's designed for trucks and heavy machinery, not customer-facing businesses. However, industrial rates can surge when demand spikes-like during the 2025 e-commerce boom, when rates jumped 20% in key logistics hubs.
Should I pay more for a "prime" location?
It depends on your business. A high-end fashion brand might justify $2,500/sqm in Melbourne's CBD for brand visibility, but a warehouse operator would overpay for the same rate. Calculate your expected revenue from the location. If a $2,000/sqm retail space brings in $500,000 annual sales, the cost is 0.4% of revenue-a good ratio. If it only brings $100,000, the ratio is 2%-too high. Always tie the price to your specific business needs.
