Australia’s CBD office vacancy rate jumped to 14.3% in early 2025, up from 13.7%in January, driven by a surge of new supply.
The Property Council of Australia’s July Office Market Report shows that more than 200,000 sqm of fresh stock entered CBD markets in the six months to July, adding to the 2.6 million sqm delivered nationally in the past five years.
“The Australian CBD office market has seen a continued expansion of supply,” Property Council Chief Executive Mike Zorbas said.
“While there was an uptick in the overall vacancy rate, this is mainly due to the additional supply, as demand for office space has been positive.”
Premium Stock Still in Favour
Premium-grade space continues to dominate, with new projects and refurbishments capturing the bulk of leasing activity.
The report shows premium-grade occupied stock jumped 2.7% in the past six months — a 7% lift year-on-year.
A-grade edged up just 0.1%, while B, C, and D all went backwards.
“Over the last six months, Premium and A Grade buildings saw positive levels of demand, while B, C, and D Grade buildings experienced negative demand,” Mr Zorbas said.
High amenity and ESG outcomes remain a strong hook.
“What we are continuing to see is the classic ‘flight to quality’ where organisations seek attractive, high-quality offices for their people in the more desirable locations,” he said.
Sublease Space at Five-Year Low
Sublease vacancies have also tightened sharply.
National CBD sublease space falling to 0.8% — its lowest level since July 2020 and down 0.6 percentage points from pandemic highs in 2021.
“Sublease space has declined considerably since the pandemic, reaching its lowest levels since July 2020,” Mr Zorbas said.
“This indicates that larger occupiers are slowing efforts to downsize their office footprints and have greater clarity on their future office space needs.”
CBRE Head of Office & Capital Markets Research, Australia, Tom Broderick, said the trend reflects that most businesses have now adjusted to hybrid working.
“Most tenants are now comfortable with the footprint and are likely thinking more about future expansion rather than contraction,” he said.
“I expect sublease to continue to decline, particularly in Sydney and Melbourne.”
Outlook: Supply Tapers, Rents Rise
Rents are on the rise across most CBDs, driven by a shrinking supply pipeline over the next five years.
The Property Council expects this to push vacancy rates lower and support effective rental growth.
Over the next six months, just over 131,000 sqm of CBD office space is forecast to hit the market, concentrated in Melbourne, Sydney, Adelaide, and Canberra.
Mr Broderick said vacancy should hold steady in the near term before trending lower.
“We are forecasting national vacancy to be relatively stable over the next 12 months, with some supply coming through which will offset improved demand,” he said.
“However, the supply outlook has dropped significantly over the medium term, which means we expect a steady decline in vacancy. This will drive healthy levels of rental growth.”
Office vacancy by city:
- Canberra: Rose from 9.2% to 10.7%
- Brisbane: Rose from 10.2% to 10.7%
- Sydney: Rose from 12.8% to 13.7%
- Adelaide: Fell from 16.4% to 15%
- Perth: Rose from 15.1% to 17%
- Melbourne: Fell from 18% to 17.9%
