Investment Rating - The report indicates a positive outlook for the North Shore office market as investors seek value beyond core assets [3]. Core Insights - There is a clear divide in demand, with occupiers favoring prime-grade assets over secondary options, leading to positive net absorption in the prime market [19]. - The North Sydney office market is evolving, with prime-grade assets now accounting for 46% of total stock, up from 27% a decade ago [20]. - Transaction volumes in the North Shore markets reached $927 million in 2025, with expectations for increased activity in 2026 [16]. Market Indicators - **New Supply**: The completion of Victoria Cross OSD added over 56,000 sqm of premium office space to North Sydney [6]. - **Rental Growth**: Prime net face rents in North Sydney increased by 1.8% year-on-year, averaging $945/sqm [8][21]. - **Net Absorption**: Positive net absorption of 13,717 sqm was recorded in the North Sydney prime market in 2025, while the secondary market saw negative absorption of 15,716 sqm [19]. - **Yield Trends**: Yields in North Sydney softened by 65 basis points over 2025, with current prime yields averaging 7.5% [11][66]. - **Incentives**: Prime grade incentives averaged 40%, contributing to a decline in net effective rents [14][22]. Regional Performance - **North Sydney**: The prime market is outperforming, with strong demand for high-quality office environments [19]. - **Macquarie Park**: Overall vacancy rose to 24.0%, with negative absorption of 39,981 sqm in 2025 [29][30]. - **St Leonards**: The only market with positive net absorption in 2025, recording 2,942 sqm [40]. - **Chatswood**: Lowest overall vacancy among Sydney's suburban markets, declining from 20.2% to 18.5% [52]. Future Outlook - Limited development is expected in the North Shore office market, with no significant new projects anticipated before 2030 [20][32]. - The report suggests that the current elevated yield environment enhances investment appeal, with a broad range of groups looking to deploy capital [66][67].