Australian CBD Leasing Markets: Q1 2026 Office Snapshot

Sydney’s overall vacancy rate sits at 13.8% as at January 2026, remaining at its highest level in approximately 30 years and continuing to provide occupiers with a significant amount of choice across the CBD.

Premium vacancy remains the tightest at 8.9%, unchanged over the quarter but down from 10.9% a year ago. A-Grade vacancy also tightened over the quarter, reducing from 17.6% to 16.6%, reflecting improved take-up. In contrast, B-Grade vacancy moved higher from 14.4% to 16.0%, highlighting the continued divergence between better quality and secondary stock.

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On the supply side, no new office developments are scheduled to complete in 2026. The next major supply wave is expected in 2027, with 55 Pitt Street (63,000 sqm), the Atlassian HQ (57,000 sqm), and Chifley Tower South (53,000 sqm) all currently under construction. While these projects are collectively more than 60% pre-committed, a meaningful amount of space still remains to be leased ahead of completion.

With no new completions due in 2026, vacancy is likely to remain elevated but relatively stable in the near term. Based on the scale of supply due in 2027 and current pre-commitment levels, vacancy is likely to increase again through H2 2027 and into 2028, before that space is progressively absorbed by the market.

Sublease availability in the Sydney CBD remains stable and continues to sit at approximately 0.6% of total stock, remaining below historical averages based on latest PCA data.

Larger availabilities continue to be concentrated in a small number of buildings across the CBD. Current examples include 255 Elizabeth Street (3,500 sqm), 680 George Street (4,000 sqm), and 55 Market Street (2,100 sqm) in Midtown.  

For occupiers, fitted sublease opportunities remain available across several well-located assets, although the overall volume of sublease space remains limited and continues to be concentrated in a relatively small number of buildings.

The Sydney CBD recorded 11,359 sqm of positive net absorption through the second half of 2025, with Prime stock accounting for 56,678 sqm of positive absorption, while secondary stock recorded -45,319 sqm, reinforcing that leasing demand continues to be concentrated in higher quality assets.

Demand across the Sydney CBD continues to be led by tenants targeting quality space that suits their needs. While Core options in Premium towers remain limited, stronger leasing terms in the Western Corridor and outer precincts are driving broader tenant interest. We continue to see tenants becoming open to these locations where the balance of building quality, amenity, and commercial terms is more compelling.

Some of the recent notable commitments shaping the Sydney CBD market include:

- Co-Star – Parkline Place - 6,000 sqm

- John Holland – Darling Park - 5,000 sqm

- Optiver – 275 Kent St – 9,225 sqm

- Atmos Group – 333 Kent St – 1,140 sqm (negotiated by Tenant CS)

- McPherson’s Limited – 383 Kent St – 1,133 sqm (negotiated by Tenant CS)

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One of the more notable trends emerging in the Sydney CBD is the widening rental gap between Premium and A-Grade assets. After several years of stronger rental growth in Premium stock, the spread between the two grades has moved to near record highs. In Q1 2018, the gap between Premium and A-Grade gross face rents sat at approximately $190. By Q1 2026, that spread has widened to $252, and has remained above $250 since Q1 2025, creating a more pronounced pricing difference for tenants considering best-in-class space versus high quality A-Grade alternatives.  

This is beginning to show in leasing behaviour. Over the second half of 2025, A-Grade recorded 42,189 sqm of positive net absorption, outperforming Premium at 14,489 sqm, suggesting occupiers are increasingly broadening their search into A-Grade assets where building quality remains strong but occupancy costs are typically more competitive.

This is also expected to support stronger tenant demand in precincts such as Midtown and the Western Corridor, where availability remains deeper and leasing terms continue to compare favourably to the Core. As a result, both precincts are well positioned to outperform in the coming leasing cycle as occupiers continue to balance quality, location, and cost.

Australia’s tech sector continues to scale, with around 40,000 tech companies, more than 1 million jobs and tech spending projected to grow 8.7% YoY, outpacing the broader APAC region. Within Sydney, this growth is increasingly concentrating in Tech Central, anchored by Atlassian.

Central, Central Place and the Post House, which together will deliver over 200,000 sqm of new-generation office space targeted at technology and innovation tenants. Atlassian Central alone is a 39-storey, 59,100 sqm Premium tower designed as one of the world’s tallest hybrid-timber office buildings, with an electricity-generating façade, and a fully electric, targeting market-leading Green Star and NABERS Energy ratings. When complete, Atlassian is expected to offer around 21,000 sqm for sublease across four floors in three pods, creating a rare opportunity for other occupiers to access brand-new, ESG-led space within a flagship HQ building. The Sydney Start-up Hub’s relocation from York Street into the Tech Central precinct at Pitt Street will pull early-stage and scale-up businesses into the same neighbourhood as larger tech corporates, deepening the cluster effect around Central Station. For those wanting a deeper dive on the numbers, pipeline, and tenant mix in Tech Central, we can share our 2026 Tech Leasing Landscape Overview, or you can reach out to our Director, Francois Rollin, for a more detailed discussion.

Size requirements are beginning to stabilise as hybrid workplace models mature and businesses become clearer on how they want people to use the office. Organisations are testing a range of approaches, from anchor days to activity-based and team-led models – but, importantly, most now have a better handle on typical attendance patterns and space needs than they did two or three years ago. This is consistent with what our team, including Associate Director Courtney Magro, is seeing in recent tenant projects, where requirements are being framed with greater confidence around long-term workplace intent rather than short-term experimentation.  

The sharp space give-backs of the immediate post-Covid period have eased, and this is now showing up in the sublease market: availability has fallen back below the 10-year average, indicating fewer tenants are carrying large amounts of excess space. Against this backdrop of more right-sized footprints, elevated construction costs and the highest CBD vacancy in around three decades, fewer landlords are willing to deliver full whole-floor speculative fitouts. Instead, they are focusing on lighter refurbishments or smaller suite-style spec, with layouts and capex more closely aligned to increasingly specific, data-driven tenant briefs.

You may have seen the headlines: new office developments in Sydney CBD are drying up, with no new buildings expected in 2026 and only a few slated for 2027. Some are calling it a turning point suggesting that the market is tightening, and tenants should brace for rising rents and shrinking incentives. But is this really the end of tenant-friendly conditions in Sydney’s CBD? Not quite. While this trend may apply to premium-grade assets in the Core CBD, it’s only part of the picture. As François Rollin, Sydney Director, explains:  

“Pre-commitments are falling short, especially for larger size requirements. Vacancy rates in Sydney CBD have reached their highest levels since the early 1990s for both A and B grade assets. And with AI reshaping workforce needs, there’s a layer of uncertainty around future office demand.”  

Beyond the CBD, the story continues. Just minutes away via Metro, vacancy rates remain high in key suburban markets (23,7% in North Sydney, 30,5% in St Leonards, 17,7% in Chatswood and 18,9% in Macquarie Park) making it great alternatives for tenants looking for more cost-effective solutions.

Sydney’s legal district is gradually shifting away from the traditional court precinct as leading law firms relocate to the newly revamped AMP Building at 33 Alfred Street in Circular Quay. This emerging hub will prominently feature Allens, occupying the top nine floors, alongside other major firms such as Lander & Rogers, Maddocks and Pinsent Masons. The movement reflects a broader trend of law firms seeking to upgrade their office space to strengthen corporate image, attract and retain talent, and support a return to in-office work. Recent relocations of Johnson Winter Slattery and Corrs to Quay Quarter Tower, and Gadens to Chifley Square, underline a clear preference for premium, well-located offices that combine prestige, amenity and transport connectivity.

A recent Tenant CS study of 75 mid- and top-tier law firms in Sydney found that around 39% had downsized, 60% had upsized, and the average tenure in a single building was approximately 7.5 years, driven by high relocation and fitout costs. For legal occupiers, these long commitments place a premium on getting building quality, flexibility and location right at the outset, as today’s decisions will frame workplace and brand outcomes over much of the next decade.

Sustainability is now a core filter for office occupiers, particularly larger corporates with formal decarbonisation targets. Tenant CS Director Hamish Mackay notes that for many local and offshore tenants, strong ESG credentials are treated as a baseline requirement, not a “nice to have”

Tenants are gravitating towards higher-grade assets with strong Green Star, NABERS and/or WELL ratings. At the same time, recent analysis indicates only around 28% of Australian office buildings are on track to meet major tenants’ climate needs, highlighting how limited the pool of genuinely future-proof assets still is. This is widening the gap between newly built or comprehensively refurbished towers and older, more carbon-intensive stock.

The future Atlassian HQ at Tech Central (due 2027) illustrates where demand is heading: a low-carbon, hybrid-timber, fully electric building targeting leading sustainability ratings. For tech and innovation-led occupiers, assets of this type align leasing decisions with climate commitments and employee expectations, while reducing exposure to future regulatory and carbon-cost risk.

Melbourne CBD vacancy sits at 19.0%, remaining near cyclical highs and well above long-term averages. Elevated availability continues to be driven by a combination of backfill from occupier consolidation, slower absorption of existing secondary space, and the return of major refurbished assets including 111 Bourke Street and 800 Collins Street, both of which re-entered the market with significant vacancy. Premium stock continues to record the lowest vacancy at 15.8%, below A-Grade (20.6%) and B-Grade (20.5%), highlighting the ongoing divergence between newer prime assets and older stock.

New supply remains heavily concentrated through 2026, with the current pipeline including:

- 7 Spencer Street – 45,000 sqm, completed and entering stock in Q1 2026

- 51 Flinders Lane – 29,000 sqm, completed in Q1 2026

- 435 Bourke Street – 60,000 sqm, due H2 2026

- 720 Bourke Street – 29,000 sqm refurbishment, due H2 2026

Approximately 50% of 2026 supply is currently pre-committed, meaning a significant volume of speculative space is still expected to enter the market. Based on the scale of supply due this year and current commitment levels, vacancy is likely to remain elevated through 2026 before that space is progressively absorbed.

Melbourne CBD sublease vacancy remains elevated at approximately 1.2% of total stock (c.64,000 sqm), well above the long-term average of around 42,000 sqm.

Availability is now more evenly distributed across precincts, with most recording sublease vacancy below 2%, although the North Eastern precinct continues to account for the highest concentration of space.

Melbourne continues to record the highest level of sublease availability of any Australian capital. Sublease space remains an attractive alternative to direct leasing, typically offering discounted effective rents, existing fitouts, and shorter lease terms. This continues to provide both cost savings and flexibility, particularly for occupiers seeking near-term solutions or project space.

Melbourne CBD demand improved through H2 2025, with total net absorption returning to +28,029 sqm, the strongest result since 2018. By grade, demand remained concentrated in prime stock, with A-Grade (+42,532 sqm) and Premium (+7,471 sqm) both recording positive absorption, while B-Grade (-11,955 sqm) and C-Grade (-10,251 sqm) remained negative, reflecting ongoing backfill across secondary stock.

At a precinct level, Docklands and the Eastern Core recorded the strongest take-up, while Flagstaff, Spencer, and the Western Core continued to see weaker demand. For occupiers, this continues to reinforce the divide between better-performing prime assets and older secondary stock, where availability remains elevated.

Some of the commitments which will shape the future of the Melbourne CBD include:  

- APA Group – 161 Collins Street (Civic) – 4,000 sqm

- FM Global – 51 Flinders Lane (Eastern Core) – 1,900 sqm  

- AirTrunk – 51 Flinders Lane (Eastern Core) – 1,900 sqm  

- GB Energy – 90 Collins Street (Eastern Core) – 1,139 sqm  

As noted by Jared Kroeger, a renewed shift toward A-Grade buildings is starting to emerge across the Melbourne CBD, particularly in assets that offer stronger workplace amenity and a more considered occupier experience.

“Tenants are still cost-conscious, but many are now looking more closely at how a building supports staff experience day-to-day. Buildings with strong amenity (whether that’s third spaces, upgraded lift lobbies, or end-of-trip facilities) are standing out. It’s less about a traditional flight-to-quality, and more about being selective. Tenants are willing to move up the quality curve, but only where the value is clear.”

This quarter’s leasing data supports that trend, with A-Grade face and effective rents both increasing, while Premium and B-Grade rents softened. For occupiers, the current market suggests building quality alone is no longer enough amenity, staff experience, and overall workplace value are increasingly influencing relocation decisions.

As noted by Niall Foley, the 3/2 workplace model (three days in the office, two from home) has become the most common occupancy pattern across Melbourne.  

“The 3/2 split has become the dominant workplace policy we're seeing across our Melbourne tenant base. With hybrid working now the norm, tenants are finding it harder than ever to work out how much space they actually need, and are seeking independent advice earlier in the process to avoid committing to more square metres than their headcount and attendance patterns justify."

Rather than simply renewing existing footprints, more tenants are reassessing density, collaboration requirements, and how much space is sitting underutilised. In many cases, this is leading occupiers toward smaller, better-quality workplaces, where improved amenity, fitted space, and stronger employee experience can be achieved without increasing total occupancy cost.

This shift is also contributing to broader market divergence, with stronger demand for well-presented A-Grade space, while older secondary stock continues to absorb much of the surplus space being returned to market.

From 1 January 2026, the Melbourne congestion levy on off-street parking will rise sharply, with Category 1 (CBD) increasing from $1,750 to $3,030 per bay per year and Category 2 (inner fringe) rising from $1,240 to $2,150 per bay per year – lifts of roughly 70%. The Category 2 levy area will also expand to include parts of Burnley, Cremorne, Richmond, Abbotsford, South Yarra, Windsor and Prahran, as well as sections along St Kilda Road, while the Queen Victoria Market area moves to the lower Category 2 rate.

The impact will be most pronounced for tenants with large parking allocations, where the levy is typically passed through via outgoings or licence fees and can materially increase total occupancy costs even if office rents remain steady. Several fringe and city-edge precincts that were previously relatively low-cost for parking will now carry a much higher levy. As a result, the congestion levy will become a more important factor for companies with high parking requirements when assessing which suburbs and buildings to target in the next lease cycle, sitting alongside rent, incentives, transport access and staff catchments in occupier decision-making.

Fitted space continues to be leased ahead of vacant space, but in the sub-300sqm market there is now a clearer hierarchy emerging. Well-designed, modern spec suites are being leased noticeably faster than older or more generic specs, as smaller tenants prioritise quality, convenience and avoiding upfront fitout spend. Older spec fitouts are still leasing but typically require sharper incentives or some landlord contribution towards refresh works to compete with newer, better-presented options.

ESG credentials remain part of occupier decision-making in Melbourne, but they are increasingly being assessed alongside workplace quality, operating efficiency, and overall occupancy cost. Buildings with stronger NABERS ratings, modern services, and better staff amenity continue to attract interest, particularly across Premium and A-Grade stock, where demand has improved materially over the past six months.

This shift is reflected in current leasing activity, with A-Grade recording the strongest absorption across the market, while B-Grade remained negative. Rather than prioritising lower headline occupancy costs alone, many occupiers are now weighing sustainability, employee experience, and operational efficiency together - particularly where A-Grade buildings can deliver these benefits without the pricing premium of top-tier assets.

For occupiers, ESG remains relevant, but in the current market it is increasingly influencing which prime buildings are shortlisted, rather than being the sole reason for relocation.

Brisbane CBD vacancy has increased to 11.8%, broadly in line with the 10-year long-term average (11.9%). This was driven by the completion of 360 Queen Street and the associated backfill created by tenant relocations, rather than weakening occupier demand.

Vacancy remains highly grade dependent. Premium vacancy remained tight at 8.2%, notable given Brisbane has six Premium office towers, limiting genuine top-end availability. A-Grade vacancy tightened by ~1 percentage point, reflecting continued occupier demand for quality buildings outside the premium segment. B-Grade vacancy increased to 14.8%, with older stock continuing to face the greatest leasing pressure.

PCA data also shows net demand remained positive over the six months to January 2026, with absorption concentrated in Premium stock, while A-Grade recorded negative demand as tenants relocated into new supply. At the same time, net supply remained above Brisbane’s historical average, temporarily lifting vacancy.

For tenants, there is a short-term window of improved choice across prime assets. However, with only ~90,000 sqm of committed CBD supply scheduled through 2028 ( just 3.7% of existing stock), this window may narrow once current backfill is absorbed.

Upcoming supply:

- 140 Elizabeth Street (refurbishment) – 9,908 sqm – Available 2026  

- 450 Queen Street – 17,500 sqm – Completion Q1 2027

- Waterfront Brisbane (North Tower) – 73,000 sqm – Completion Q4 2028 – c.71% pre-committed

Sublease availability in the Brisbane CBD has tightened further to 0.7% of total stock (~16,676 sqm), down from 0.9% in mid-2025. The majority of sublease space is concentrated within A Grade assets, including 123 Albert Street, 12 Creek Street and 275 George Street.  

This level sits below the long-term average of approximately 22,000 sqm, reinforcing the limited availability of secondary space across the market.  

The decline has been driven by a combination of withdrawn listings, conversion of sublease space back to direct vacancy, and ongoing absorption, rather than any broad-based contraction in occupier demand. As a result, sublease remains a small component of overall supply, indicating that most occupiers are maintaining or modestly increasing their footprint rather than downsizing.

Occupier demand in the Brisbane CBD remained positive through the six months to January 2026, supported by commitments into recently completed Premium developments. Demand continued to be concentrated in Premium-grade assets, while A-Grade absorption softened as tenants relocated into newer stock, creating backfill across existing prime buildings.

Leasing activity remains selective, with occupiers continuing to prioritise fitted space, workplace quality, and contiguous floor availability. Elevated fitout and relocation costs are also contributing to ongoing renewal activity across the market.

The completion of 360 Queen Street has temporarily increased the availability of contiguous prime space through backfill opportunities. However, supply of large contiguous options remains limited beyond 2026 until Waterfront Brisbane delivers in 2028.

Some of the commitments which will shape the future of the Brisbane CBD include:  

- ConocoPhillips – 123 Albert St – 3,000 sqm

- CIMIC –12 Creek St – 8,000 sqm  

- AEMO – 360 Queen St – 2,397 sqm

- Legal Aid – 400 George St – 7133 sqm

The completion of 360 Queen Street has temporarily increased prime availability through backfill space, however the forward development pipeline remains limited beyond committed refurbishments and Waterfront Brisbane in 2028. With relatively little new stock expected over the next several years, occupiers approaching lease expiry are increasingly weighing whether to renew in existing accommodation or secure future space earlier than historically required.

This is particularly relevant for larger tenants requiring contiguous floors, with a limited pipeline of large prime floorplate opportunities between mid-2026 and late-2028. As a result, timing risk is becoming a more important factor in leasing strategy, particularly for occupiers with complex workplace, staging, or relocation requirements.

At the same time, rising construction costs, labour shortages, and infrastructure delivery pressures continue to impact the feasibility of new office development across Brisban. These conditions are reducing the likelihood of speculative office supply entering the market in the near term.

Elevated fitout and construction costs continue to influence leasing decisions across the Brisbane CBD. Research shows fitted space accounted for the majority of full-floor leasing activity during 2025, as occupiers looked to reduce upfront capital expenditure and shorten delivery timeframes.  

This is increasing demand for fitted and partially fitted opportunities across both Prime and Secondary assets, particularly where existing fitouts can be adapted rather than fully replaced. In several cases, occupiers are prioritising speed-to-occupancy and reduced capital outlay over securing completely new workspace solutions.

The trend is also contributing to higher renewal activity, with some occupiers choosing to retain and refresh existing accommodation rather than absorb the cost and disruption associated with relocation.

Secondary vacancy remains elevated relative to Prime stock, particularly across older B-Grade buildings. While this continues to place pressure on some landlords, it is also creating greater flexibility for occupiers seeking lower occupancy costs, shorter lease terms, or fitted solutions.

A number of secondary owners are responding through refurbishment programs, upgraded end-of-trip facilities, and speculative fitouts aimed at improving competitiveness against newer assets. For tenants, this is creating a wider range of options across the market, particularly for project-based users, smaller occupiers, and businesses balancing workplace quality against cost control.

Rising construction costs, labour shortages, and infrastructure delivery pressures continue to impact the feasibility of new office development across Brisbane. Industry research indicates Brisbane is now among the most expensive office construction markets in Australia, with further cost escalation expected over the next several years as major infrastructure and Olympic-related projects compete for labour and materials.  

These conditions are contributing to a limited forward office pipeline, with relatively few projects progressing beyond currently committed developments. As a result, much of the market’s future leasing supply is expected to come from refurbishment activity and backfill space rather than new tower development.

For tenants, this is increasing the relevance of existing A-Grade and upgraded B-Grade assets, where landlords are continuing to invest in building amenity, sustainability upgrades, and fitted space to remain competitive against newer stock.

Sustainability and building performance are continuing to play a larger role in office selection across the Brisbane CBD, particularly for corporate and government occupiers. While sustainability requirements are not always the primary driver of relocation, buildings with stronger NABERS ratings, upgraded end-of-trip facilities, and modern workplace environments are increasingly being prioritised during tenant shortlisting processes.

This is contributing to greater divergence between upgraded and non-upgraded stock, particularly within the secondary market. Refurbished A-Grade and higher-quality B-Grade buildings with sustainability improvements are generally competing more effectively for occupiers than older assets lacking capital investment.

For tenants, sustainability requirements are increasingly being assessed alongside occupancy cost, workplace quality, and fitout capability rather than as standalone considerations.