Australia’s major CBD office markets are showing signs of early cycle recovery, with both leasing and capital markets expected to improve through 2025, per the Investa Inside Research Office Market Outlook 2025 report.
Headwinds from the post-COVID work transition appear to be easing, as hybrid work patterns settle. Lower inflation and anticipated interest rate cuts will ease pressure on Australian business conditions, and macro conditions are expected to support positive leasing demand and capital growth in the coming year.
David Cannington, Head of Research & Strategy, Investa said: “Sydney CBD is leading the pack of Australia’s major office markets in terms of positive leasing demand and capital market activity. However, Australia’s other major office markets are at varying stages of cyclical recovery, with both leasing and capital markets expected to improve through 2025.”
The Investa Inside report also examines the Office market in detail and provides four key insights:
- Market conditions to tighten: office demand in 2025 is expected strengthen, outpacing supply across Australia’s major CBD office markets for the first time since early 2020.
- Tenant expansion to lift demand: analysis by Investa Inside indicates that office-based businesses are in the early stages of an expansion phase. Increased office-based business headcount combined with weaker post-COVID work transition headwinds are expected to support tenant expansion and leasing demand in 2025.
- Competition for quality to intensify: following a solid few years of new office completions, new office supply is expected to slow sharply in 2025. Constrained by high construction costs and input supply constraints, new office supply is forecast to slow to a 7-year low in 2025.
- Recovery of office capital markets: Australia’s office capital markets are showing early signs of a cyclical recovery, with increased transactions activity reflecting stronger investor sentiment and an outlook for near-term decreases in interest rates and Australian bond yields. However, the cyclical recovery across Australia’s major CBD office capital markets is expected to vary, with Sydney CBD prime market assets leading the pack.
The report also provides other key insights into what to expect in the Office market in 2025. It is available for download here.
