Developers are moving back into the office market, buoyed by a lift in investor confidence.
Colliers’ latest Office Middle Markets Report shows $3.8 billion in office assets traded nationally in the year to July 2025, just 2.5% below the previous year.
Activity was concentrated in the back half of 2024, when developers and opportunistic investors drove $2.2 billion in acquisitions, targeting properties with redevelopment or repositioning potential.
Matthew Meynell, Managing Director of Office Capital Markets and Investment Services at Colliers, said developers were using cyclical conditions to acquire assets at significant discounts compared to peak values and well below replacement cost.
“Fundamentally, strong population growth and constrained housing supply have underpinned significant demand for housing in Australia, particularly in key population growth corridors,” Mr Meynell said.
“Developers are seeking to capitalise on this demand for housing by acquiring underperforming secondary office assets with plans to redevelop them to living or mixed-use projects.”
Sydney and Melbourne Lead the Rebound
Nowhere was the developer surge more pronounced than in New South Wales, which recorded $1.6 billion in sales across 30 assets.
Metro hubs such as North Sydney, Parramatta, and Chatswood were standouts, alongside strong CBD fringe activity.
Victoria also impressed, with $930 million transacted across 29 assets - up 19% year-on-year.
The Melbourne CBD led the charge with $607 million in deals, an 89% increase from the previous year and its busiest year since 2022.
Domestic buyers were key players, taking advantage of softer competition from offshore investors.
“At an asset level, we are seeing developers acquire lower quality assets with leasing or vacancy risk, as these assets generally have a short WALE or are holding higher rates of vacancy, together with a requirement for significant capex,” Mr Meynell said.
“These assets are generally trading for steeper discounts and, as a result, are more attractive to developers.”
What this Means for the Next 12 Months
The rebound has set the tone for a decisive year ahead in office investment.
However, while late 2024 was dominated by developers, the first half of 2025 has already seen a more diverse buyer pool return, including government (6.1%), institutional investors (6.6%), unlisted funds (15%), and owner-occupiers (18%).
Mr Meynell said two themes would likely shape the year ahead.
First, he expects developers to remain active - though not at the same intensity as last year.
“As values begin to stabilise and more deal evidence continues to firm market pricing, we should see greater diversity in the buyer pool and potentially the re-entry of institutional investors,” he said.
Second, if planned redevelopments proceed, the withdrawal of secondary office stock and the displacement of tenants should flow through to high-quality assets.
“The proposed projects will deliver much-needed amenities and a greater residential population, allowing existing assets to thrive, and creating activated precincts to live, work, and play,” he said.
Notably, the property generated the highest number of enquiries of any property of all time in Victoria on CommercialReady.
