Commercial Market Insights 2025: Navigating Tenant Demand for Speculative Suites in Sydney
Note: This article was written alongside Sheldon's Speculative Suite Handbook 2024/2025. To download the free handbook you can click HERE.
A macroeconomic analysis of the challenges within the commercial real estate market of the past few years has revealed structural shifts within the office landscape. This change has resulted in both tenants and landlords rethinking the space needed to best suit their requirements. There is an increased demand for lease flexibility and flexible workspace, particularly for tenants who are not ready to make long-term decision‒thus the appeal of speculatively fitted space. Across Australian cities, leasing agents and building owners alike work to provide assurance and agility in a time of uncertainty for business owners.
The appeal of the fitted space in 2025 is clear. For tenants, it reduces move-in time, delivery risk, and the upfront capital expense commitment. For building owners it speeds up the leasing process and attracts a wider demographic of potential tenants. This approach is not without challenges, given the requirements for capital expenditure by landlords. However, with shorter voids, reduced incentives, and the potential of repurposing the fitout across multiple tenancies, the leasing case for this strategy is compelling. Over 80% of leasing inquiries since the pandemic have been for move-in-ready spaces, marking a 30% increase from pre-pandemic levels.
Spec suites offer clear advantages for both tenants and landlords. For tenants, they reduce move-in time by up to 4.5 months and eliminate the need for capital outlay on custom fit-outs. For building owners, this approach significantly accelerates leasing speed, reducing vacancy rates and shortening voids, making them attractive to tenants across a wide range of industries.
The demand is particularly strong in the Sydney CBD, where the vacancy rate recently declined from 12.2% to 11.6% amid limited new supply. Despite this, premium vacancies have risen to 13% due to recent additions of high-quality space. Higher-grade fitted suites attract the attention of tenants looking for flexibility, which is reflected in their willingness to pay premium rents, with A-grade spec suites in Sydney CBD averaging $1,470 per sqm and incentives hovering around 10-15%, significantly lower than the typical 38% incentive in non-speculative spaces, as identified by Tenant CS.
Sheldon’s Recent Speculative Suite Designed and Constructed for LaSalle at 323 Castlereagh St, Sydney.
As tenant expectations continue to shift, building owners who invest in high-quality speculative suites are well-positioned to capture the demand. By integrating features such as flexible layouts and sustainable design, owners can provide agile solutions for a diverse tenant pool, enhancing asset value in the Sydney commercial real estate market.
“We’ve seen significant recent change in the commercial real estate market’s approach to office fitouts. We’re in an exciting time for workplace design and construction, as the partnership between leasing agents, building owners, and fitout providers becomes more collaborative. Sheldon is excited to continue our relationships with stakeholders in developing the future of adaptable and innovative speculative suites.”