The XCap View: 2025 Reflections and What’s Next in 2026

In 2025, one message came through consistently in XCap’s investor and adviser conversations. People wanted the story behind the numbers, including what supports an investment opportunity’s income and why it is positioned to hold up over time.

For XCap, 2025 was also a year of establishment and execution. The XCap Office Fund and the XCap LFR Heatherbrae Fund were brought to market with a clear focus on income-producing assets in regional economies, backed by disciplined asset selection and transparent governance.

Newcastle, NSW

Income Certainty Sets the Agenda in Office Markets

Last year, the XCap team observed that confidence in the office market remained selective, with investors increasingly focused on assets capable of delivering reliable income. Nationally, the latest Property Council of Australia Office Market Report indicates that tenant demand has continued to favour premium office space, as businesses prioritise buildings that support employee experience, location and long-term operational needs.

Newcastle illustrates how this ‘flight to quality’ is playing out at a local level. While the addition of new space has lifted overall vacancy, the market continues to attract occupiers. The latest results show A-grade buildings capturing the majority of leasing activity, reflecting the national preference for better-located, higher-performing office space. Newcastle also ranks among the leading non-CBD office markets nationally for tenant demand.

That principle underpins the XCap Office Fund, which holds two fully leased A-Grade office assets in the Hunter Region. The Fund comprises Darby Plaza in the Newcastle CBD and a single-tenancy office interest at Macquarie Tower in Charlestown, providing long WALE income supported by high-quality tenants

“Across 2025, the strongest office conversations centred on evidence: why a building wins and just as importantly maintains tenants, and why a location keeps generating occupier demand. In 2026, that advantage will sit with modern, efficient stock in service-led regional centres like Newcastle, where the demand drivers are visible and repeatable,” Geoff Robinson, Managing Director at XCap.

Retail Fundamentals Are Drawing Capital

Throughout 2025, retail activity underscored a simple point: capital will move when income is supported by practical tenant demand. CBRE reported $15.5 billion of Australian commercial real estate transactions in the first half of 2025, up 13 per cent year on year, with retail among the more active sectors.

Investors and advisers repeatedly came back to what drives traffic to large-format retail. Centres defined by straightforward access and a tenancy mix weighted to bulky goods and everyday services provided a stronger foundation for assessing income.

The XCap LFR Heatherbrae Fund is anchored by Heatherbrae Supa Centre at the Pacific Highway and M1 interchange, capturing both local trade and passing traffic into the Hunter Region. That gateway position supports a tenancy profile across bulky goods, fast food and fuel that aligns with how the corridor is used.

“In 2026, we expect investors to continue favouring large-format retail that serves practical, everyday needs. Centres anchored by bulky goods, trade suppliers and convenience operators tend to attract consistent customer traffic because visits are tied to specific tasks rather than discretionary shopping. For investors, that behaviour supports more stable tenant demand and greater income certainty,” says Jonathan Craig, Director at XCap.

Heatherbrae Supa Centre, Pacific Highway and M1 interchange

Regional Conviction Requires Precision

Regional conviction in 2025 was earned through verifiable signals. Employment depth, essential services and sustained public investment matter because they shape the demand that sits behind commercial income.

Newcastle is a standout case study, where sustained public and private investment signals long-term commitment and provides a stronger basis for private capital to assess demand fundamentals. City of Newcastle reported $164.1 million in infrastructure delivery in 2024/25, including road and connectivity upgrades that are improving access across key employment and retail corridors, directly supporting surrounding commercial assets.

This local investment sits alongside significantly larger economic activity across the region. The Hunter Region supports more than 57,000 businesses, while the Port of Newcastle facilitates around $48 billion in annual trade and is advancing plans for a major clean energy precinct expected to create around 5,800 jobs. Major projects such as the $250 million Newcastle Airport precinct redevelopment, the $835 million John Hunter Health and Innovation Precinct and the $500 million redevelopment of Maitland Hospital further reinforce the scale of investment shaping the regional economy.

For investors, signals like these support a more precise read on regional fundamentals, including where employment depth is strengthening, where essential services are expanding, and where supply and demand dynamics are supported by real investment.

“Across the regional markets we have looked at, Newcastle and the Hunter Region keep coming out on top,” says Geoff.

“We have a simple checklist around employment depth, essential services and the investment that is landing on the ground, then we test it against the data. Newcastle keeps validating itself, which is why we keep backing Newcastle and the Hunter Region. You only have to look at GDP, it is the strongest Regional economy supporting the highest growth statistics in the country and we expect that to continue into 2026 even as we stay alert to other regional opportunities.”

The Signals Shaping 2026

2025 marked a strong year of establishment for XCap, with an industry-leading team established and capital raising opened for the XCap Office Fund and the XCap LFR Heatherbrae Fund. With that foundation in place, 2026 is positioned to build momentum as investors lean into regional commercial assets backed by real economic activity and look for managers with the capability and governance to execute.

For XCap, the year ahead is focused on growth with intent. That means deepening relationships across the adviser and wholesale community, continuing to originate opportunities that meet the firm’s regional investment criteria, and maintaining the governance settings established at launch.

“In 2026, XCap is focused on applying the same disciplined approach across every decision. We’ve built the platform, governance and team to execute consistently and keep investors informed as conditions evolve,” concludes Luke Barker, Funds Management Executive at XCap.

Street view of Darby Plaza

If you would like to learn more about XCap and current opportunities, please visit our Funds page, where more detailed information is available for review.