In Q2 2025, the Sydney CBD office market saw vacancy grow, yields remain stable, and an increase in investment transaction volume.
Vacancy and supply
Vacancy in the Sydney CBD office market lifted from 12.8% to 13.1% in Q2 2025. The increase was largely driven by new supply, with 33,730 sqm added during the quarter. Key completions included 14,000 sqm at 1 Martin Place and 19,730 sqm at 30 The Bond.
Although more office space has been added to the market, leasing activity has increased and tenants have been acquiring some of this new space, which has helped limit the rise in vacancy. There were no major building withdrawals in Q2, which meant the extra supply continued to put pressure on vacancy rates.
Most of the new projects coming through are prime-grade buildings, showing that demand is still strongest for high-quality offices. Recent completions include 11,500 sqm at 121 Castlereagh Street, 17,000 sqm at Darling Park Tower 1 (Stage 2), and 15,900 sqm at 5 Martin Place.
Yields
Yields in the Sydney CBD have remained stable, following a period of modest widening through 2024. For prime assets, yields increased from 5.78% in Q1 2024 to 6.04% in Q4 2024, then slightly sharpened to 6.01% in Q1 2025 and have held at that level through Q2.
Secondary yields have also stayed steady, averaging between 7.25% and 8.00% since late 2024. This shows a clear divide in the market: prime assets are maintaining value thanks to ongoing demand, while secondary assets face challenges due to weaker tenant interest and higher vacancy.
Investment market
Stable yields have made the Sydney CBD office market more appealing to investors. Transaction volumes were strong in early 2025, building on the first half of 2024 — which was the busiest period for Sydney office sales since 2020. Activity slowed slightly in Q2, with no major headline deals, though 16–18 Bulletin Place sold to Wentworth Capital for $9 million from Roger William Allen.
Overall, the market appears to be settling, with prime-grade buildings continuing to attract both investment and leasing demand, while secondary assets face more structural pressure.
Sources: