The future of office space in Australia is once again in the spotlight.
With Australia’s return-to-office movement showing signs of leveling off, fresh questions arise for commercial mortgage holders and brokers navigating a still-evolving office market.
"A lot of people have adopted the attitude of, if I can't work from home, I'll get another job," Kevin Wheatley, founder and managing director of Sydney-based Bayside Residential and Commercial Mortgages, told Australian Broker.
This prevailing mindset has no doubt influenced office occupancy levels. It's also a noted contrast from the start of the year, when companies across the globe laid out return-to-office instructions. In fact, thus far in 2025, Amazon, Tesla, Tabcorp and Citigroup are just a few of the firms mandating employees make an appearance in person five days a week. Meanwhile, the likes of Meta, Woolworths, Coles, and even Zoom, are requiring at least a partial return to office.
The earlier wave of corporate directives had many predicting a meaningful recovery for the commercial office sector. For landlords, it offered hope of reversing pandemic-era vacancies. For brokers, it hinted at new lending opportunities across the commercial space.
But recent data suggests that rebound may be losing steam. National weekday office attendance averaged 76.6% of pre-pandemic benchmarks in the March 2025 quarter, up just 1.1 percentage points from the previous quarter, according to a research note by financial services firm Barrenjoey. The modest increase suggests the rapid rebound in office occupancy, one that was seen in prior quarters, may be tapering off.
For many commercial landlords, the slow return continues to pose challenges, even five years after COVID-19 reshaped workplace norms.
Wheatley pointed out that office occupancy rates have yet to return to pre-pandemic levels. In Sydney's central business district, occupancy rates were just 3.7% in July 2019, according to the Property Council of Australia. The non-profit industry group reported vacancy rates in the same area jumped to 12.8% in January 2025.
"And I can't see demand coming back anytime soon," Wheatley said.
The stagnation also adds complexity to forecasts: Has the market found its new, lower equilibrium? Or is this simply a pause before another upswing?
Wheatley said the net effect has been contracted values in Australia's commercial office sector – something he doesn't see rebounding anytime soon.
"With AI, with all the intelligence today, you'll see more and more people either working out of service offices, or they'll build home offices," he said. "There will be more and more home offices built for convenience, because people can work from anywhere today."
But despite the declines in foot traffic, Chris Hall, founder and managing director of Sydney-based brokerage Blue Crane Capital, said current office values have likely hit their lowest point.
“We've seen the bottom of the market with office values, as each month, more and more people are coming back to the office,” Hall said.
He noted that the next step lies with employers and property owners to adapt to evolving expectations.
“It's just up to the owners of the businesses or the landlords to make an attractive space for employees to come back and work," Hall said.
The commercial office market may not be returning to what it was, but it’s far from finished. With hybrid work models solidifying and tenant preferences shifting, brokers will need to stay agile, offering lending solutions that align with a changing definition of office utility and value. And as businesses reassess their office footprints and lenders become more selective, brokers will need to guide clients through a landscape that now favours high-quality, adaptable properties with stable tenant demand. Meanwhile, brokers who understand lender risk appetite and can help structure deals for asset upgrades, repositioning, or even partial conversions will be in a strong position to add value.
"Overall, it's a very positive sign for brokers," Wheatley said of the evolving office space market.
"With 76.8% of borrowers using brokers, the need for commercial brokers will have to go up as well," he said. Wheatley estimated that only 15% of commercial borrowers in Australia use brokers, while others suggest the figure may be closer to 30%. Either way, the gap leaves plenty of white space for brokers.
"Many brokers find commercial [lending] too complex," Wheatley said. "But if a broker, inexperienced in commercial, wants to partner up with people like myself and many others who specialize in commercial work, then we can mentor them and assist in building additional revenue for them."
Commercial brokers can gain valuable skills, such as the ability to interpret commercial lease agreements and assess the affordability of space on a per-square-foot basis, he said.
"By us mentoring them and partnering with them, they're going to pick up additional revenue and get lessons along the way," Wheatley said.
In addition, there are opportunities for niche lending in the current environment, as many traditional banks face tighter regulatory scrutiny. This creates room for non-banks and private lenders to step in, offering bespoke solutions.
Moreover, the trend points to the potential for more emphasis on property redevelopment or repurposing properties. This would likely open opportunities for brokers who understand development or renovation loans.
For commercial mortgage holders, stabilizing office values may provide some relief after several years of market uncertainty. With signs that prices have bottomed out, borrowers may avoid further asset devaluations that could trigger covenant breaches or refinancing risks.
However, the plateau in return-to-office rates also highlights the long-term shift in demand for office space. Properties that are outdated or not well-suited to hybrid work may continue to face leasing challenges, and, in turn, greater scrutiny from lenders.
Wheatley added that not all hope is lost as the market continues to evolve. Despite falling property values, there’s growing opportunity in new formats, especially shared office spaces.
"Human interaction is very important for your wellbeing," he said. "And this is where I think there'll be a high demand for rental offices, because it gives you a balance of work and lifestyle."
