Australian CBD Office Figures Q1 2025

Key points: 

• The labour market has remained resilient with unemployment at just 4.1% in February 2025, and jobs growing by 1.9% over the past 12 months.
•  Average effective rent for prime Australian CBD office rose by 0.4% q-o-q and 4.9% y-o-y.
• It is unclear how the global trade tensions will impact on the Australian leasing market. Periods of volatility generally lead to indecision from tenants, meaning that more occupiers might default to renewals. 
• Future growth in office stock across Australia has dropped from 8.3% to 4.6% over the past 3 years, highlighting the challenges for new office development in Australia at the moment.
• Transaction activity in Q1 2024 reached $1.7 billion, up 28% compared from the same period last year. The RBA’s Cash Rate was cut by 25 bps in February, which has improved buyer sentiment in the market. However, market volatility may impact on sentiment moving forward. 
• Australian CBD average prime yields softened by 8 bps in Q1 2024 to average 6.68%. The Australian average cap rate has now softened by 176 bps from the peak of mid-2022.