Office market confidence returns amid uneven recovery  

Confidence in Australia’s office market is bouncing back as offshore investors reportedly show increasing interest in the asset class, but it hasn’t been the same story across every market.  

Commercial real estate agents say the office recovery is underway, with stronger leasing, rental growth and limited development activity bolstering the bull case for the asset class.  

But experts have warned that the office market recovery is at different stages throughout the country and values in some markets may not have reached the bottom just yet. 

The latest Procore/Property Council survey — a measure of property industry sentiment — showed the industry expected office capital values to rise over the next 12 months, marking a major turnaround in confidence compared to the same time last year.   

Investors splashed $4.4 billion on Australian office real estate during the first half of the year, on par with the same period last year, according to MSCI figures.  

Sydney attracted the largest share of Australia’s office investment volumes during the first six months of 2025. Picture: Getty

Sydney captured the lion’s share of large transactions during the first half of 2025, including the sale of the 135 King Street office tower to Japanese property giant Daibiru Corporation for $600 million. 

The improvement in sentiment comes as offshore investors take a closer look at Australian office property, according to Daniel Wolman, international director and co-head investment sales, Victoria at Cushman and Wakefield.  

“I just spent a few days on a road show throughout Asia and worked with a lot of investors who are looking at Australia,” he said.  

“We’re now getting a lot of groups looking at Australia as a great opportunity, with our exchange rate being relatively inexpensive for Asian capital to invest here, as well as our strong supply and demand story.”  

Mr Wolman pointed to Australia’s growing population, improving rental growth conditions and recent return-to-office mandates from major employers as positive drivers for the office market.  

New office construction has slowed down due to high building costs and other factors. Picture: Getty

Office rents have been rising despite vacancy rates remaining at higher-than-normal levels, with CBD office rents growing 3.6 per cent during the 12 months to June 2025, according to Colliers.  

Cameron Williams, managing director of office leasing, Australia at Colliers, said limited new office supply was supporting rental growth broadly, but markets were at different stages of the cycle.  

“It’s a really interesting dynamic at the moment because some markets are operating more or less in sync, while others are a little more advanced in the cycle,” he said.  

“Brisbane is the best example because it’s probably had the most rental growth and we’re starting to see some pullback in demand because of that strong rental growth.” 

Mr Williams said there were promising signs for future office leasing and rental growth due to high construction costs holding back the construction of new office space.  

Experts predict investors will be more active in Australia’s office markets over the next 12 months. Picture: Getty

“In cities like Sydney, Melbourne and even Brisbane, there’s very few new projects that are likely to get up and out of the ground in the next few years,” he said.   

“I think we’re going to see a big turnaround in effective rental growth over the course of the next few years.”   

Limited supply and improving rental growth has supported values in some office markets, but not all.  

Benjamin Martin-Henry, head of private assets research, Pacific at MSCI, said office values in Sydney, Brisbane and Perth had stabilised, while it was less clear in markets such as Melbourne.  

However, Mr Martin-Henry was certain there would be a turnaround in office sales next year.  

“You’ll start to see an increase in investment levels in offices across all markets in Australia, and that’ll in turn lead to an uptick in performance,” he said.  

“The next 12 months will certainly be brighter than the past 12 months have been, regardless of the market.”