Australian Office Markets Recover as Remote Work Momentum Fades and CBD Demand Rebounds

The Quick Take

• Growing demand for office space is emerging in Australia's major CBD markets as remote work momentum shows signs of reversal after the pandemic-era peak
• Sydney and Melbourne office markets are seeing improved leasing activity as employers reassert return-to-office mandates and expand corporate footprints
• The office market recovery creates a positive inflection for Australian commercial REITs that have traded at deep discounts to net asset value during the work-from-home cycle

Australia's CBD office markets recovering from the post-pandemic work-from-home surge represents one of the more significant inflection points for Australian commercial real estate investment trusts and property developers. Sydney and Melbourne office vacancy rates, which reached multi-decade highs as major corporations reduced their leased footprints during 2022-2024, are now seeing absorption as corporate return-to-office mandates reach their maximum enforcement phase. The demand trend is being led by financial services, professional services, and technology firms that had the flexibility to reduce office usage but are now reconfiguring spaces for hybrid-team collaboration rather than traditional desk-per-employee models.

The Australian commercial REIT sector—including Dexus, GPT Group, Mirvac, and Scentre Group—has traded at persistent discounts to net asset value as the market priced in structural occupancy decline as a permanent feature. If CBD office absorption continues recovering, investors will need to reassess these discounts. The global context matters: London and New York office markets have shown that financial sector and professional services demand can fully absorb post-COVID vacancy in premium CBD locations within three to four years of the post-pandemic low, and Australia's major cities appear to be following a similar trajectory.

Forward signals include Australia's quarterly commercial property council vacancy survey and leasing activity data from CBRE and JLL—the two largest commercial real estate brokers with comprehensive Australian market data. The macro variable is Australian employment growth in knowledge-economy sectors: office demand correlates tightly with professional services headcount growth, which depends on Reserve Bank of Australia interest rate policy and its effect on business formation rates. Watch for Dexus's next portfolio update for the earliest read on whether the CBD recovery is translating into improved occupancy and rental rate metrics.

Synthesized from 2 sources.