As companies increasingly relocate to or closer to central business districts (CBDs), decentralised office rents have experienced their first decline in four years, falling by 0.8% quarter-on-quarter in the second quarter of 2025. This shift marks a significant turning point in the commercial real estate market, as businesses adapt to evolving operational needs and market conditions. The average rent for decentralised offices has now dropped to $7.61 per square foot per month, while the demand for CBD spaces continues to rise, pushing office rents in these prime locations up to $11.69 per square foot per month.
The trend towards recentralisation among firms is attributed to a variety of strategic considerations. Many companies are finding that being located in or near the CBD provides them with enhanced visibility, better access to talent, and improved client engagement opportunities. As such, the increasing movement towards central locations reflects a broader repositioning of business priorities, with firms prioritising operational efficiency and client-oriented service models.
This shift is compounded by ongoing rightsizing efforts, as businesses reevaluate their space needs in light of changing workforce dynamics and the growing trend towards hybrid work models. The narrowing rent gap between CBD and decentralised offices, now reduced to approximately 30% to 35%, represents a significant adjustment from historical levels that consistently hovered around 50% to 60%.
This change indicates a re-evaluation of the value associated with decentralised office space, as companies weigh the benefits of location against rental costs. The competitive pricing of CBD office spaces is compelling companies to reconsider their current leases and explore options closer to the urban core.
The decline in decentralised office rents is not merely a reflection of companies leaving these spaces but also indicative of evolving tenant demands. As the market adapts, there is an increased focus on client-oriented operations, which necessitate closer proximity to key stakeholders. Businesses are recognising the necessity of being in environments conducive to collaboration and engagement, leading to strategic relocations that favour the CBDs.
While the drop in decentralised office rents signifies challenges for landlords and property owners in those areas, it also provides an opportunity for tenants to negotiate favorable lease terms. As vacancy rates rise in decentralised markets, landlords may be compelled to offer reduced rents or additional tenant incentives to attract and retain occupants.
This dynamic could lead to a longer-term impact on the market landscape, as businesses that remain in decentralised locations reassess their strategies in light of evolving trends.
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News Source: Edgeprop
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