2025-08-18-莱坊-Sydney_CBD_Office_Market_August_2025页_1mb

Sydney CBD Office Market Summary - August 2025

Core Content

The Sydney CBD office market has shown signs of strengthening, with the highest annualised net absorption since 2016. Key indicators include a drop in premium vacancy, robust occupier demand, and positive rental growth in core areas. The market is also experiencing a tightening of incentives and a shift in investment activity, with offshore capital playing a significant role.

Main Trends

• Occupier Market Strengthening:

  • Annualised net absorption reached 56,532sqm in 2025, the strongest since 2016.
  • Over 400,000sqm of active tenant briefs tracked over the last 12 months.
  • Demand is concentrated in the CBD Core precinct, which accounts for 60% of deal volumes.
  • Financial services and professional services are the top sectors driving demand, accounting for 33% and 34% of total deal volumes respectively.

• Vacancy Rates:

  • Overall premium vacancy dropped from 13% to 9.8% since January 2024.
  • Total CBD vacancy rate stands at 13.7% as of July 2025.
  • Sublease vacancy is at its lowest level since 2019, measuring 0.8%.

• Rental Growth:

  • Prime net effective rents increased by 4.3% in the Core precinct, the strongest growth across all precincts.
  • Prime net face rents rose by 1.9% to $1,342/sqm, while secondary net face rents increased by 1.6% to $970/sqm.
  • Prime incentives averaged 35.9%, down slightly from previous levels.

• Supply Dynamics:

  • Total premium office stock in Sydney CBD reached 5,367,514sqm, up 3.7% year-on-year.
  • 163,000sqm of premium-grade office space is under construction between 2025-2029, with limited availability.
  • Only three buildings are under construction for 2027, with Chifley South and Atlassian Central showing strong pre-commitment.

• Investment Activity:

  • 2025 YTD transaction volumes reached $1.5bn, driven by offshore capital, particularly from Japan and the US.
  • Yields for prime office assets are stable at 6.03%, with secondary yields at 6.50%.
  • Yield spreads highlight the preference for core locations, with the Core precinct offering the highest returns.

Key Insights

• Flight to Quality:

  • The trend of seeking high-quality, amenity-rich workspaces continues, especially in core areas with proximity to transport, retail, and green spaces.
  • Premium assets have outperformed the secondary market over the last five years, with positive absorption of 279,858sqm versus negative absorption of 258,982sqm in the secondary market.

• New Developments:

  • Recent developments like 33 Alfred Street, 121 Castlereagh Street, and 270 Pitt Street have achieved strong leasing outcomes.
  • Refurbishments by Charter Hall and others have also contributed to the market's resilience and attractiveness.

• Future Outlook:

  • A supply drought is expected in the coming years due to limited new developments and high development costs.
  • Capital values are transitioning into growth as yields remain stable and rental growth is positive.
  • Investment activity is likely to increase in the second half of 2025 as geopolitical and macroeconomic conditions improve.

Major Office Supply

Recent Significant Tenant Commitments

*Net sale price
Source: Knight Frank Research

Investment Activity

• Yield Compression:

  • Prime and secondary yields have softened by over 160bps since their peak.
  • The Core precinct offers the best yield spreads, with a 45bps gap over Midtown and a 139bps gap over Southern.

• Transaction Highlights:

  • 135 King Street was acquired by Daibiru Corporation for $631.5 million at a 6.20% blended yield.
  • MEC Global Partners acquired a 10% stake in 180 George Street for $200 million.

• Capital Deployment:

  • With the global interest rate cutting cycle continuing, investors are showing increased confidence in the market.
  • Secondary and suburban markets may still see further declines over the next 12 months.

Conclusion

The Sydney CBD office market is experiencing a strong recovery, driven by occupier demand, quality assets, and offshore investment. Premium-grade spaces are in high demand, with limited supply and strong leasing outcomes. The Core precinct is leading the market with positive absorption, rental growth, and lower vacancy rates. As the supply pipeline continues to be constrained, the market is expected to see further capital growth and increased investment activity in the second half of 2025.