Over the past few years, whenever Australian office property has been discussed, investors have often associated the sector with a familiar list of concerns:
Work From Home. Rising vacancy. Empty offices. Falling asset values.
As a result, many investors have concluded that office property is no longer an attractive investment.
But a recent market transaction presents a more nuanced picture.
One of Australia’s largest commercial property groups, Dexus, sold more than A$1.4 billion of office assets within a single week, including Brisbane landmark office tower 480 Queen Street, which was acquired by global asset manager Barings.
If office property truly had no long-term value, why would international capital choose to invest at this point in the cycle?
The more important question is not:
“Who is selling?”
It is:
“Why is someone willing to buy?”
The Market Is Entering a New Phase: Not All Offices Are Equal
Following the pandemic, many investors assumed office property had broadly lost its appeal.
In reality, the more significant change is that the office market is undergoing rapid structural differentiation.
The market is increasingly separating into two distinct categories.
The first: Secondary Office Assets
These typically include properties with:
- Less competitive locations
- Older buildings
- Limited upgrade potential
- Weaker tenant appeal
The second: Prime and Premium Office Assets
These tend to be characterised by:
- Core CBD locations
- Excellent transport connectivity
- High-quality tenants
- Strong ESG credentials
- High-quality amenities and workplace environments
- The ability to continue attracting major occupiers
International capital is not necessarily betting on the entire office sector.
It is increasingly targeting the highest-quality assets with long-term competitive advantages.
Why Is International Capital Returning to CBD Office Property?
There are three important long-term trends behind this shift.
1. The Supply of High-Quality Office Space Is Becoming More Limited
Higher financing costs, elevated construction costs and longer development timelines have significantly slowed the delivery of new large-scale office projects.
At the same time, many businesses are adopting a “quality over quantity” approach.
They may require less overall office space, but are increasingly willing to pay for:
- Better locations
- Excellent transport access
- Green-certified buildings
- High-quality workplace environments
- Better employee amenities
In other words:
Businesses may be reducing their footprint, but they are becoming more selective about the space they retain.
For high-quality office assets, this can create a stronger competitive position.
Barings’ acquisition of 480 Queen Street reflects this broader investment thesis: limited future supply combined with improving long-term demand for high-quality CBD office space.
2. Institutional Capital Is Looking at the Next 10 Years — Not the Next 10 Months
One common mistake investors make is interpreting a decline in office valuations as evidence that the asset class has lost its long-term value.
Institutional investors typically take a different approach.
Their key question is:
“Will this property still be capable of attracting quality tenants over the next decade?”
Brisbane provides an interesting example.
The city has benefited from several structural tailwinds, including:
- Population growth
- Major infrastructure investment associated with the 2032 Olympic and Paralympic Games
- Corporate relocations
- Infrastructure upgrades
- Improving CBD office demand
These long-term fundamentals can be far more important to an institutional investor than short-term market sentiment.
3. Value Opportunities Are Emerging Through Market Repricing
The sale of 480 Queen Street reportedly occurred at a modest discount to its previous book value.
For some investors, this may simply signal a weaker office market.
For institutional capital, however, it can represent something very different:
the emergence of long-term value.
Sophisticated investors do not necessarily wait until the entire market becomes optimistic before buying.
Instead, they often look to acquire high-quality assets while the market is undergoing repricing.
That is why we can see two very different strategies taking place at the same time:
One investor sells because it needs to rebalance its portfolio.
Another buys because it sees long-term value.
The transaction itself is only half the story.
Understanding why each party is acting is often more important.
From a Banking Perspective, We Ask a Different Question: Is the Asset Financeable?
When evaluating commercial property, many investors start with:
“What is the yield?”
or:
“How much capital growth could this property achieve?”
With a banking background, we tend to ask several additional questions:
Will a bank be comfortable lending against this asset?
How resilient is the valuation?
Is the lease structure strong enough to support financing?
If the property needs to be sold in the future, will there be sufficient buyer demand?
Because the true value of a commercial property is not simply whether you can buy it today.
It is whether the asset remains:
financeable, holdable and saleable over its investment lifecycle.
This is one of the key differences between Cornerstone Assets and a traditional commercial property agency.
We look beyond the property itself and consider the broader investment framework, including bank lending, financing structure, cash flow and risk management.
Cornerstone Assets’ View: The Market Is Entering an Era of “Selective Assets”
During the low-interest-rate era, many commercial properties benefited from broad market appreciation.
Today’s environment is fundamentally different.
Capital is becoming increasingly selective.
The assets attracting long-term investor attention are more likely to have characteristics such as:
- Located in areas with long-term population growth
- Supported by stable tenants and genuine cash flow
- Underpinned by industries with strong demand
- Located on land with long-term scarcity
- Capable of generating future rental growth
And this principle extends well beyond office property.
It applies across sectors including:
Healthcare, convenience retail, industrial property, childcare and selected hospitality assets.
Going forward, investment performance is likely to depend increasingly on the quality of the individual asset, rather than simply on broad market appreciation.
The Cornerstone Assets Difference
In recent years, more clients have approached Cornerstone Assets looking to transition from residential investment into commercial property.
Their questions are increasingly moving beyond:
“Which property is the cheapest?”
Instead, they want to understand:
- Which asset types are more likely to receive ongoing bank support?
- Which cash flows are genuinely sustainable?
- Which properties can perform through different economic cycles?
- How can they build a long-term portfolio with stable and sustainable income?
Combining our experience as commercial property buyer’s advocates with our banking and financing background, we assess opportunities through three interconnected lenses:
Investment.
Financing.
Risk management.
Our objective is not simply to help a client buy a property.
It is to help them acquire a commercial asset that is genuinely suitable for long-term ownership.
The Bigger Picture
Dexus continuing to sell office assets does not necessarily mean that office property has lost its value.
Instead, it highlights a broader shift:
Australian commercial property is entering another phase of structural repricing.
The question is not simply who is selling.
The more important question is:
Who is willing to take the other side of the transaction — and why are they prepared to invest significant capital at this point in the cycle?
For long-term investors, some of the most compelling opportunities can emerge during periods of market differentiation, rather than when everyone is equally optimistic.
Is Commercial Property Part of Your Long-Term Asset Strategy?
Perhaps you are considering gradually reducing concentration risk and building a more stable and sustainable source of cash flow.
Perhaps you want to move beyond a single-property investment mindset and take a more strategic approach to long-term asset allocation and family wealth planning.
Or perhaps you are currently reviewing your assets and looking to establish a clearer direction for your next investment.
Now may be an appropriate time for a strategic assessment.
Book a 30-minute one-on-one commercial property consultation with Cornerstone Assets.
We take a buyer-only approach, combining your asset structure, risk profile and long-term objectives with our commercial property and banking perspective.
Our goal is to provide independent, professional and actionable insights — helping you build a clearer investment framework and make commercial property decisions based on long-term fundamentals rather than short-term market sentiment.
