For the past few years, discussions about Australia’s office market have been dominated by familiar themes:
- Remote work
- Hybrid working
- Rising office vacancies
- The decline of the office sector
As a result, many investors have reached a simple conclusion:
“Office buildings are no longer a good investment.”
However, a recent JLL Australia Office Fit-Out Cost Guide tells a very different story.
According to the report:
- Office fit-out costs across Australia increased by 3.5% to 6% over the past year.
- Average fit-out costs have now reached approximately AUD $3,000 per square metre.
- Demand for premium, high-specification office space continues to remain strong.
These figures suggest that the issue facing the office market is not a lack of demand.
Instead, the real question has become:
What type of office space do businesses still want?
Australia’s Office Market Is Becoming Increasingly Polarised
For many years, office property was often viewed as a single asset class.
Today, that assumption no longer holds true.
The market is increasingly dividing into two very different categories.
On one side are:
- Prime-grade office buildings
- Premium-grade office assets
- ESG-certified workplaces
- High-quality, modern office environments
On the other are:
- Older office buildings
- Functionally obsolete assets
- Properties with limited upgrade potential
The performance gap between these two groups continues to widen.
Businesses Haven’t Given Up on the Office—They’ve Redefined Its Purpose
Following the pandemic, many predicted that remote work would permanently replace the traditional office.
In reality, many large organisations are placing renewed emphasis on physical workplaces.
The reason is straightforward.
The office is no longer viewed simply as a place where employees work.
It has become a platform for:
- Building company culture
- Encouraging collaboration
- Attracting and retaining talent
- Hosting clients
- Reinforcing brand identity
As a result, businesses are becoming increasingly selective about the quality of their workplace environments.
Why Are Office Fit-Out Costs Continuing to Rise?
According to JLL, labour shortages remain the single largest driver of rising fit-out costs.
Australia’s skilled construction workforce is currently being stretched across several major sectors, including:
- Data centre development
- National infrastructure projects
- Western Australia’s mining and resources sector
- Brisbane 2032 Olympic infrastructure
The result is sustained upward pressure on construction pricing.
Today, building works account for approximately 50% of total office fit-out costs, making refurbishment significantly more expensive than in previous years.
An Overlooked Trend: Fit-Out Quality Is Becoming Part of an Office Building’s Competitive Advantage
Traditionally, office investors focused primarily on:
- Location
- Floor area
- Rental income
Increasingly, however, tenants are evaluating a much broader range of factors, including:
- Fit-out quality
- Workplace technology
- Employee experience
- AI-ready digital infrastructure
- Collaborative workspace design
These features are now directly influencing leasing decisions.
In other words, businesses are no longer leasing simply for office space.
They are choosing workplaces that help them attract, retain and support talented employees.
Why More Tenants Are Choosing Pre-Fitted Offices
As construction costs continue to rise, another clear trend has emerged.
An increasing number of occupiers now prefer ready-to-occupy office suites that have already been fitted out by the landlord.
The advantages are clear:
- Lower upfront capital expenditure
- Faster relocation
- Reduced construction risk
- Greater budgeting certainty
For office owners, this presents an important opportunity.
Buildings offering high-quality, move-in-ready office space may enjoy a significant competitive advantage in attracting and retaining tenants.
Cornerstone Assets’ Perspective: The Office Market Isn’t Disappearing—It’s Evolving
Much of the public discussion over recent years has centred on whether offices have become obsolete.
Our observation is different.
Businesses are not abandoning offices.
They are abandoning offices that no longer meet their operational needs.
Over the next decade, successful office buildings are likely to share several defining characteristics:
- Prime locations
- High-quality fit-outs
- Strong ESG credentials
- Flexible workplace design
- Advanced technology infrastructure
In many respects, the office market is beginning to resemble the hotel industry.
Premium assets continue to attract demand, while lower-quality buildings face increasing competitive pressure.
What Does This Mean for Investors?
Investing in office property today requires a different perspective than it did a decade ago.
Investors can no longer evaluate office assets based solely on:
- Initial yield
- Lease term
- Current rental income
Equal attention should now be given to:
- Future capital expenditure requirements
- Tenant appeal
- Upgrade potential
- Long-term competitive positioning
Although two office buildings may appear similar today, their long-term performance could differ substantially depending on their ability to meet the evolving needs of occupiers.
The Value Cornerstone Assets Brings
Many of the clients who approach Cornerstone Assets to acquire commercial property between $1 million and $5 millionshare a common objective.
They have established successful careers, own residential property, and are now looking to build:
- More stable income-producing assets
- A stronger long-term wealth strategy
- A more resilient investment portfolio
Their focus is no longer simply:
“Where should I buy?”
Instead, they ask:
- Which assets are genuinely suitable for long-term ownership?
- Which cash flows are likely to remain resilient across market cycles?
- Which commercial property sectors will remain competitive over the next decade?
That is where Cornerstone Assets provides value.
We act exclusively for buyers.
We do not represent sellers, and we do not accept vendor commissions.
Our role is to help clients navigate an increasingly complex commercial property market and identify assets with the quality, resilience and long-term fundamentals required for sustainable wealth creation.
