CBD Offices Rebound as Demand Tightens

After years of slow demand, office space in major Australian city centres is finally starting to recover. In the last quarter, more office leases were signed than terminated. This shift is pushing rents higher in premium buildings, with some in Sydney rising by more than 9%. The trend is driven by more people returning to the office and limited space availability.

Over the past financial year, Sydney has led the recovery. Top-tier buildings close to public transport have seen the fastest rent growth. These locations offer better facilities and, as vacancy drops, they are attracting both tenants and major investors. This improvement follows a stagnant period during the pandemic. At the same time, buildings in outer areas are being either knocked down or converted to other uses.

In the second quarter of 2025, Sydney absorbed 23,500 square metres of net office space. That figure represents nearly half of the nationwide total of 56,900 square metres. Investment firms are stepping back into the market, pursuing major transactions including a $1.4 billion office stake deal and speeding up leasing across selected portfolios. Projects like the planned Halo tower and upgrades to key landmark buildings in central areas are now back on the table.

This momentum signals the start of a broader market recovery. Effective rents, which reflect what landlords actually receive after incentives, are increasing as vacancy tightens. Current leasing activity suggests that markets in Sydney, Melbourne and Brisbane are headed toward even lower vacancy and stronger building values. Although high construction and borrowing costs continue to limit new development, rising demand from tenants is creating strong competition for premium office space.

Source: Australian Financial Review, Property Council of Australia, Investa, Cushman & Wakefield, JLL

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