Alongside the release of the latest Property Council of Australia Office Market Report, our Office Leasing specialists provide their perspectives on the emerging trends shaping Australia's major office markets.
NATIONAL
Commenting on the national leasing market, Tim Molchanoff, Cushman & Wakefield’s Head of Office Leasing, Australia and New Zealand, said:“The national leasing market in Australia continues to show a strong preference for high-quality properties, with tenants seeking better locations and a range of amenities.”
“This is driving significant demand for central core assets across our CBD markets, helping push rents higher, while the Fringe and Metro markets sit slightly behind. Supply pipelines vary by city, but one thing is evident: economic rents are above market rents across our markets, which will likely hamper the delivery of some proposed projects.”
“This will further fuel rental growth across the country, in which we expect Sydney core and Brisbane to outperform the other markets. A tight labour market and an expanding white-collar workforce will fuel additional demand across most of our major markets”.
NEW SOUTH WALES
Sydney CBD
Tim Stanway, Cushman & Wakefield’s Head of Office Leasing, NSW described 2024 as a tale of two halves. "The first half of 2024 saw a significant portion of tenant enquiries and demand directed towards the CBD core.
“As has been the trend in recent years, there was a significant flight to quality. However, concerns over workplace strategy, the evolving business landscape, and uncertain economic conditions that lingered from 2023 continued into early 2024, hampering some growth potential. "In the second half of 2024, we observed additional demand extending beyond the CBD core, particularly in Midtown and Western Corridor Precincts. This period saw a significant uptick in the 'flight to value,' with tenants targeting good quality assets with larger floorplates. This additional demand contributed to strong rental growth in the last few months, with the growth rate in the final two quarters outpacing that of the first half of the year.”
“Looking towards 2025, we foresee stronger business and tenant confidence driven by anticipated interest rate cuts in the first half of the year. With new supply improving quality across the market, we expect a steady rise in rents throughout the year. Combined with better economic conditions and a recovery in capital markets, the outlook for Sydney’s CBD in 2025 is considerably brighter compared to last year.”
VICTORIA
Melbourne CBD
Marc Mengoni, Cushman & Wakefield’s National Director, Office Leasing Victoria, said:“2025 will see Melbourne’s office market rebound from the rising vacancy of the past two years, with new supply stagnant and a returned focus to quality backfill opportunities. Vacancy announced by the PCA in February, along with inflated incentives, have peaked and activity moving forward will be a positive step forward for the market to allow a steady return to equilibrium.”
“Positively, over the past 12 months we have seen strong demand from Metropolitan occupiers relocating their headquarters to Melbourne’s CBD and inner Fringe locations as they seek to improve workplace access and drive cultural change for the next generation of employees.”
“For the time being, market conditions are favourable for active tenants and most are discovering not only can they afford better quality offices, situated on major transport hubs, but in some cases actually reduce costs.”
Melbourne Fringe
Jake Patterson, Cushman & Wakefield’s Associate Director, Office Leasing VIC said:“Throughout 2024 across Melbourne city's fringe, we saw tenants gravitate to 'flight to value' (being good quality, existing fitted office space with a market incentive on top) and we expect this to continue in 2025 as businesses push for a return to the office.”
“Along St Kilda Road, the vacancy rates have dropped, which is due to the uplift in deals from 2023 to 2024 and multiple buildings being converted to residential. We expect demand to continue for the northern St Kilda precinct with the new Anzac Station opening in 2025.”
“Richmond and Cremorne faced some headwinds due to competition with the CBD market. Tenants appear to be drawn to the different advantages of the CBD (e.g., public transport options) as well as the strong deals available. We expect vacancy to drop within Richmond and Cremorne as new supply is limited in 2025.”
QUEENSLAND
Brisbane
Jack Neumann, Cushman & Wakefield’s Manager - Office Leasing, QLD said:“Brisbane’s CBD vacancy has remained relatively stable throughout the back half 2024, with only one major refurbishment and no new additions during the year. However, with no new completions expected until the second half of 2025, we’re likely to see vacancy rates tighten to levels not seen in the CBD since 2012.”
“Following practical completion of 205 North Quay and 360 Queen Street, we expect vacancy to drift upwards slightly, but with most of the space already pre-committed and backfill space accounted for, the drift will be minimal.”
“Demand remains strong for high quality office space in the CBD, while options are still available, suitable options accommodating tenant demands are becoming increasingly limited. With inquiry levels remaining high and space options constrained by tightening vacancy, face rents are expected to continue rising, especially for prime assets. Although rental growth may not reach the peaks of previous years, we still expect very strong growth through 2025.”
WESTERN AUSTRALIA
Perth
Roly Egerton-Warburton, Cushman & Wakefield’s National Director, Head of Office Leasing, WA said:
“Perth continues to experience an extremely tight labour market, so the major occupiers are upgrading to higher quality assets, with recent refurbishments, to help them compete for the best staff.”
“Net rents have seen significant growth, with incentives stable. Office occupancy remains the strongest in the country, with ‘back to the office’ a major theme.”
“Fitted space continues to dominate the leasing landscape, as tenants seek to save time and capital. Construction costs seem unlikely to correct in the foreseeable.”
“State and Federal Government tenants remain highly active, and mining continues to propel the economy, and as a result, drive many of the CBD’s major lease transactions.”
SOUTH AUSTRALIA
Adelaide
According to Adam Hartley, Cushman & Wakefield's Director & Head of Office Leasing – SA, the focus for higher quality office accommodation continued through 2024 and will continue in 2025.
“The need for higher quality accommodation with better facilities and close proximity to local amenities is still top of mind to encourage return to work. Refurbished second grade and new buildings are being sought and landlords are investing in their buildings to cater to these demands.”
“Fringe and Metro markets are showing similar signs, resulting in lower levels of A grade stock and an opportunity for these landlords to proactively upgrade their assets. The need for fitted space broadens, due to the high cost of construction and shorter lease terms making traditional leasing deals challenging.”
“Ongoing demand in 2025 will reduce vacancy levels across the new and quality refurbished assets. 2025 is a great time for tenants to take advantage of the higher vacancy rates due to the recent completion of new office towers. Reduced new stock pipeline will result in reduced vacancy and reduction on quality fitted office accommodation. Effective rental rates should improve for building owners in late 2025 and into 2026, as vacancy rates decline”.
