Thought leadership by Chelsea Hickey Director Office Leasing.
Sydney’s office market is undergoing a quiet yet significant transformation, as tenants turn their sights towards assets that are presenting greater value propositions, putting upgraded B-Grade assets back in focus. As tenants recalibrate their priorities in response to shifting economic conditions and evolving workplace expectations, value is now sharing the spotlight with quality.
In 2025, demand for B-Grade office space has surged, driven by a tightening supply of prime-grade options and a growing appetite for cost-effective office solutions. Year-to-date, leasing activity in B-Grade stock has jumped 42% compared to 2024, with 109 deals already completed in this sector of the market. Notably, 77% of transactions completed involve fitted space, underscoring a clear expectation by tenants around workplace design and readiness.
Today, fitouts need to maximise every square metre, create strong first impressions and support hybrid work models. From multifunctional breakout areas that double as town halls to video call rooms and flexible meeting zones, the modern office is being reimagined to serve both culture and productivity.
B-Grade landlords emulating the strategic upgrades of their prime grade peers, such as refreshed lobbies and enhanced end-of-trip facilities and wellness offerings, are being rewarded with stronger leasing momentum and higher occupancy rates.
Currently, 10,506 sqm of B-Grade deals are in play across 31 transactions, signalling that cost-effective office solutions are front of mind for occupiers in this economic landscape.
Value is playing a significant role in leasing decisions, with existing fitouts and retrofitted space proving particularly attractive due to its ability to offer greater rental abatements to tenants. As at 1 September 2025, 62% of Colliers’ deals in progress had existing fitouts, compared to just 20% for speculative fitouts and 18% for refurbished spaces.
Location remains a key factor, especially in the context of talent attraction, ESG, and workplace experience. The Core CBD continues to lead leasing activity, accounting for 44% of current deals. However, sub-markets like the Western Corridor and Midtown are making a comeback month-on-month throughout Q3 2025, offering compelling value propositions that resonate with tenants, particularly for larger occupiers who don’t require a premium address.
Interestingly, ESG is no longer a differentiator, it’s an expectation. Tenants seeking prime-grade space assume a minimum 5-Star NABERS rating and robust social and governance initiatives. Landlords have spent years building their ESG credentials, and tenants are now rewarding that effort with loyalty and trust.
As we move into the second half of 2025, leasing momentum shows no signs of slowing. Most 2026 lease expiries over 1,000 sqm are already spoken for, and the market is in active negotiation for 2027 lease commencement dates. For landlords, the message is clear – upgrade now to avoid unessesary downtime.
Related Articles
