Why Sydney’s Office Market is Evolving in 2025

After a period of uncertainty, Sydney’s office sector is finding its new rhythm. With rising demand for quality space and shifting tenant expectations, 2025 marks a turning point in how and where businesses occupy commercial real estate.

Flight to quality is reshaping the market

Tenants aren’t downsizing — they’re upgrading. Businesses are moving out of outdated buildings and into newer, better-connected, more efficient offices.

• Demand is rising for A-grade and premium office space

• Older, lower-grade stock is struggling to attract long-term tenants

• ESG factors are now influencing leasing decisions

• Tenants are seeking buildings with end-of-trip, wellness, and smart tech features

• Fit-for-purpose design is now a key differentiator

Prime CBD space is in demand

Contrary to headlines, Sydney’s CBD isn’t empty — but it is evolving. High-performing sectors are actively leasing in core precincts, and incentives are starting to stabilise.

• Finance, legal and tech firms are driving demand in the core CBD

• Barangaroo remains a standout for premium, efficient floorplates

• Sydney Metro is improving accessibility across the CBD fringe

• Vacancy in premium towers is significantly lower than secondary stock

• Refurbished heritage buildings are also attracting boutique tenants

Fringe and metro office markets are performing

Office demand has spread beyond the CBD. Businesses are prioritising convenience, amenity and connection to residential catchments — and that’s putting suburban office hubs in the spotlight.

• North Sydney, Parramatta, Macquarie Park and South Sydney are in high demand

• Accessibility and proximity to skilled workers are key drivers

• Newer buildings with high sustainability ratings attract better tenants

• Suburban office assets offer competitive yields and lower risk

• Government decentralisation is also supporting growth outside the CBD

ESG is no longer optional

Environmental and social performance are now baseline requirements for major tenants. Office buildings that can’t meet these expectations are being left behind — fast.

• NABERS and Green Star ratings heavily influence leasing decisions

• Tenants are focused on energy efficiency and carbon reduction

• Wellness design and flexible floorplans add long-term value

• Landlords are upgrading to remain competitive in the market

• Sustainable buildings are commanding stronger rents and longer lease terms

Occupiers want flexibility, not just space

Modern businesses are looking for offices that support flexible working patterns — without compromising on collaboration, branding, or performance.

• Demand for adaptable floorplates and shared breakout areas is rising

• Hybrid work models still favour strong central locations

• Private offices, meeting spaces and hot-desking coexist in new designs

• Fit-outs are being customised for post-pandemic work cultures

• Buildings offering plug-and-play space are leasing faster

Sublease space is being absorbed

The wave of sublease availability that followed the pandemic is finally easing. Larger businesses are now taking back space as headcounts grow and business confidence improves.

• Sublease volumes have dropped across core and fringe markets

• Larger tenancies are consolidating into better-quality spaces

• Demand is returning in both traditional and flexible leasing formats

• Agents are seeing fewer short-term deals and more 5–7 year terms

• Sublease incentives are narrowing, reflecting stronger competition

Investors are watching rental growth closely

While yields have shifted with rising interest rates, many investors are looking beyond short-term value to focus on buildings that meet future demand.

• Quality assets in strong locations remain tightly held

• Refurbishment projects are unlocking value in ageing stock

• Leasing risk is now concentrated in B and C-grade towers

• Institutional funds are focusing on ESG-aligned buildings

• Core-plus strategies are gaining traction in Sydney’s fringe

Where the opportunity is in 2025

Not all office assets are equal — but those that meet modern business needs are leasing quickly and attracting serious buyer interest.

• Barangaroo, Martin Place, Circular Quay – premium demand and low vacancy

• North Sydney – active leasing and new project completions

• Parramatta – government and health-sector growth

• South Sydney & Alexandria – creative and light commercial demand

• Macquarie Park – life sciences and tech tenants expanding

In summary

Sydney’s office market is evolving — not declining. The flight to quality is in full swing, ESG is reshaping decision-making, and fringe markets are playing a bigger role than ever. For investors and landlords, the message is clear: adapt or be left behind.

• Demand for premium office space remains strong

• Fringe and suburban markets are outperforming older CBD stock

• ESG and flexibility are driving tenant decisions

• Sublease space is being reabsorbed

• Opportunity exists in well-located, future-focused buildings