Investa Inside

We believe office demand in 2025 will strengthen, to outpace supply across Australia’s major CBD office markets – for the first time since early 2020. Three factors are expected to drive increased office leasing demand in 2025: ​

1. Lower inflation and likely interest rate cuts are expected to improve business conditions and increase office-based business headcount.​
2. Evidence indicates office tenant businesses are largely at, or near a post-COVID hybrid workplace ‘steady state’.​
3. High quality office stock is leading the office leasing market recovery.​

Our analysis 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.​

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, we forecast new office supply will slow to a 7-year low in 2025. ​

Paired with stronger underlying office leasing demand and a continued ‘flight to quality, amenity & sustainability’ theme, we expect this will see a material shift in major CBD office market conditions, with increased competition for high quality and well-located office stock.​

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, we expect the cyclical recovery across Australia’s major CBD office capital markets to vary, with Sydney CBD prime market assets leading the pack.​