CBRE commentary: Property Council of Australia office vacancy statistics August 2025

To accompany the release of the latest Property Council of Australia Office Market Report, CBRE's Office Leasing experts share their insights into the key trends emerging in Australia's major office markets.

National overview:

Tom Broderick, CBRE Head of Office & Capital Markets Research, Australia

“We are finding that tenants in 2025 are thinking less about contraction and more towards expansion in the coming years. This is showing in our sublease availability numbers, which were significantly lower over the past 12 months.

“Rents continue to rise around the country, driven partly by higher economic rents of new developments. The supply outlook has moderated over the next five years, which will drive vacancy rates lower and underpin effective rental growth.

“Leasing activity has been slower in some markets in H1 2025, partly due to market volatility from tariffs, the Federal election and high fitout costs restricting tenant movement. However, we expect increased deal flow in H2 2025 and 2026, with current rental rates likely to be more favourable than in future years.”

Tim Courtnall, CBRE Head of Investor Leasing, Pacific

“Australia’s major office markets experienced varied trading conditions in the first half of 2025, shaped by ongoing external pressures on commercial leasing. Overall, the sector continued to face headwinds, with prolonged decision-making processes - particularly among larger occupiers.

“In Q2, we began to observe a shift in sentiment, with more week-to-week stability and a positive response to interest rate movements. This helped restore confidence in the market.

“On a positive note, most Australian markets saw a decline in sublease vacancy rates and continued growth in face rents. Transaction volumes remained steady in Perth, Adelaide, and Melbourne, although incentive levels remained under upward pressure. Conversely, Sydney, Brisbane, and Canberra experienced lower volumes of relocation transactions, with Q1 activity in these cities nearing two-decade lows.

“Interestingly, enquiry levels remain strong across all markets. However, many occupiers are opting to renew leases rather than relocate, drawn by high incentive levels, cost savings, and minimal operational disruption.

“Despite the challenges of the first half, we anticipate a stronger second half of the year with enquiry building momentum across the country. I expect strong leasing volumes over the next two quarters with vacancy rates expected to decline across key cities, driven by further interest rate cuts, headcount growth, and continuing focus from occupiers on improving their workplace.

City by city agent commentary:

Sydney 
Rachel Vincent, State Director & Head of Office Leasing, New South Wales

“The Sydney leasing market is witnessing a resurgence from commuters utilising the new Sydney Metro, with commute times halving for many. In North Sydney, the Victoria Cross and North Sydney stations have seen commuter number rise by 25% since 2023/24 and a similar trend is being seen in the CBD. This could be correlated to the uptick in general demand and for larger enquiries of 5000sqm+, totalling approximately 250,000sqm of offices space requird in the CBD.

“The three main trends we are seeing across all key precincts - including the Sydney CBD, North Sydney, Western Sydney, and South Sydney - are flight to value, protracted decision-making timeframes, and fit outs being critical.

“On average, tenants are taking 14 months or more for 1000sqm deals. Tenants are carefully deliberating their decisions as they weigh up several considerations including, attracting and retaining talent while considering their bottom line, good quality existing fitouts versus new fit outs, perception alignment to brand, ideal size and ideal location.

“Fitouts are critical to lease space, with 97% of tenants in the CBD considering fitted space. Agents, asset managers and landlords now need to understand design as capital expenditure must produce a return on investment. While design terms like colour palette, muted tones, biophilia, and hotelisation roll off the tongue, it is imperative that speculative fitouts are well thought out and designed to ensure they meet now and future tenant requirements and, importantly, result in an inspection followed by shortlisting and ultimately a transaction.

“Rising construction costs have led many developers to re-evaluate projects. This deliberation, combined with the need for higher pre-commitment rates and economically viable rents, is leading to a decrease in new office supply. This in turn will likely result in lower vacancy rates. In 2025 we will start to see the CBD core and good quality A-grade properties leased, which will reduce choice for tenants.

“Given these dynamics, face rents continue to climb. The average Prime all precinct CBD face rental rate figure currently sits at $1,249 AUD/sqm while the Core precinct average sits at 1,538 AUD/sqm. We anticipate that face rents will continue on an upward trajectory, especially as new supply slows over the coming years. It is also worth noting that outgoings are increasing amid higher land tax, electricity and insurance costs.

“Overall, the Sydney leasing market presents a dynamic environment with strong tenant demand, extended transactions, and rising rents. Landlords and tenants alike are adopting strategic approaches to navigate this competitive landscape.”

Melbourne
Ashley Buller, Head of Office Leasing, Victoria

“The first half of 2025 brought a notable shift in office leasing activity, particularly in the larger end of the market. According to recent data, total demand has increased by 15% compared to the same period last year, driven primarily by a surge in briefs over 1,000 sqm.

“While Q2 saw a return to more stable levels of enquiry, there was a year-on-year decrease of around 20,000 sqm. However, H1 2025 is tracking approximately 20,000 sqm ahead of H1 2024 and 50,000 sqm ahead of H2 2024, indicating strengthening underlying demand.

“The market's current momentum hinges on the outcome of several significant 2,000+ sqm requirements that are still in play. Once these decisions begin to formalise, particularly in tighter sub-markets such as Melbourne's East End, we anticipate a significant uplift in transactional activity.

“In the sub-1,000 sqm market, there has been a modest decline in brief volumes compared to H1 2024, though activity in the sub-500 sqm range remains strong. The most striking trend, however, is the clear resurgence in demand from larger occupiers, with the 1,000+ sqm cohort showing its strongest growth in years.

“Looking ahead, while we still expect to see positive absorption, the government's aspirational goal to reduce in size could potentially bring further space to the market in the future. The domino effect of some large tenant movements is starting to take place, with some agreements now in place subject to leases being signed, impacting other large tenants and ultimately resulting in some tenants missing out on their desired option.”

Brisbane
Coen Riddle, Director, Office Leasing

“Brisbane's office market is a compelling story of resilience and opportunity. While the beginning of the year was quite soft in regards to new relocation deals, approx. 50% down y-o-y, the underlying fundamentals remain robust, setting the stage for a strong recovery. We’re observing strategic shifts, with the Federal Government's continued activity providing a steadying influence. Though a temporary dip in net absorption occurred in the second half of 2024 and continued into H1 2025, CBRE Research anticipates a normalisation of net absorption into 2026 and beyond, driven by tenant consolidation within the CBD and organic growth.

“The supply side is constrained, which further strengthens our positive outlook. Two significant buildings are coming online in 2025 - 205 North Quay, already pre-committed, and 360 Queen Street, which is expected to be fully leased by completion. CBRE research projects total vacancy to reach 10.7% by the end of 2025 as new projects come online, but then anticipates a sharp contraction, with vacancy projected to be approximately 5.5-6.0% by 2028. With improving transaction volumes anticipated over the next 18 months, fuelled by potential interest rate cuts, and Brisbane's strong leasing market fundamentals, the market will continue to see strong face and effective rental growth for the remainder of the decade.”

Gold Coast
Tania Moore, Senior Director, Office Leasing

“The latest Property Council of Australia Office Market Report for the six months to 30 June 2025 has recorded a modest 1% increase in office vacancy across the Gold Coast, equating to approximately 4,600sqm of additional vacant space.

“This uplift has been largely concentrated in Southport, driven by a contraction in the vocational education and training (VET) sector. The Federal Government’s recent cap on international student visas and prioritising of higher education and research students over VET applicants has had a significant impact to the financial viability of these businesses, leading to the closure or liquidation of several major education providers. In total, approximately 7,000sqm of education-related office space has been vacated across the Gold Coast in the first half of 2025.

“Despite this, the upper end of the market remains resilient. A-grade office space continues to perform strongly, with vacancy sitting at just 2.7%, around 2,300sqm, underscoring the ongoing demand for high-quality accommodation. In contrast, the increase in vacancy has been more pronounced in lower B- to D-grade stock, which now accounts for an estimated 70% of total market vacancy.

“Since December 2022, overall vacancy has remained relatively stable in the mid-6% range. This consistency has contributed to a gridlocked environment at the top end of the market, where rising rents and limited alternative options, particularly those with existing fitouts, are constraining tenant movement. We anticipate continued rental growth in this segment supported by tight supply and sustained demand.

“However, challenges persist in the lower-grade sector, particularly for larger-format spaces previously occupied by education providers. These tenancies, often exceeding 500sqm, located at ground level and fitted out for educational use present re-leasing challenges due to their scale and configuration. A number of these assets are being held for future redevelopment, and as such, it may prove difficult to materially reduce vacancy in this segment over the short to medium term.”

Adelaide
Andrew Bahr, Director, Office Leasing   

“The Adelaide CBD office market continues to perform strongly off the back of a standout 2024 that delivered net absorption nearly ten times the long-term average. This exceptional performance has been driven by sustained demand for high-quality office space, particularly in the 1,000 sqm+ range, as occupiers seek to consolidate and modernise their workplaces.

“Vacancy in Adelaide’s best buildings remains extremely tight, with very limited availability of contiguous space in the newer Prime assets. Activity is strong in a basket of regenerated buildings - notably 30 Pirie Street, 100 King William Street, 55 Currie Street and 45 Pirie Street - all of which are offering a new level of building amenity, in some cases surpassing that of newer developments. With upgraded lobbies, end-of-trip facilities, wellness spaces, meeting rooms and lecture theatres, these assets are attracting strong interest from tenants seeking quality without the premium rents of brand-new towers.

“The Defence industry continues to be a major contributor to demand, both direct and indirect, and as of mid-2025, of all industry types, there are 23 active tenant briefs in the market for spaces over 1,000 sqm. By the numbers, leasing activity remains robust, with Q2 2025 enquiry volumes up 21% year-on-year. 92% of all enquiries in Q2 requested fitted space, reflecting a strong preference for turnkey solutions. The average size of enquiry rose to 361 sqm, a 14% increase, and the total number of enquiries exceeded the six-year average, with 88% of enquiries by number seeking space below 500 sqm.

“At the smaller end of the market, demand for speculative suites under 300 sqm has rebounded after a slower Q1 2025, likely impacted by the cost of living crisis. This resurgence suggests renewed confidence among smaller occupiers and a growing economic environment.”

Perth 
James Phelan, Director, Office Leasing

“The Perth office market is primed for stronger rental growth, underpinned by a combination of constrained supply, tenant expansion, and a growing number of occupiers relocating into the CBD. Enquiry levels during the first half of 2025 are up 24% compared to the second half of 2024, while transaction volumes have increased by 43% over the same period. This uplift in activity reflects growing occupier confidence and supports the broader narrative of a tightening market and rising rents.

“Perth has entered its longest supply gap in 25 years, with no new office developments expected until at least 2030. This is exceptional news for existing landlords, as the lack of new stock will place upward pressure on rents and reduce tenant options—particularly in the premium segment of the market.

“Tenant expansion remains a dominant theme in 2025. Of the tenants that relocated this year, 52% have chosen to expand their footprint, while only 14% have opted to downsize. This trend reflects the strong business confidence currently evident across Western Australia.

“In 2025 alone, 12 tenants - over 500sqm - have relocated to the CBD, contributing to 10,500sqm of net absorption. We believe 2025 could mark the highest level of suburban-to-CBD relocations since we began tracking this data in 2018. All of these tenants settled in either A- or B-grade buildings, providing a boost to these segments of the market.

“As a result of these dynamics, the Perth CBD vacancy rate is expected to trend downward. Rents are already responding, with average office rents up 5.1% year-on-year. CBRE forecasts this tightening will drive rental growth of at least 25% over the next five years, as market rents catch up to current economic rents. We do not expect this growth to be incremental. Instead, we anticipate a step-change in rents from mid-2026 onwards.

“Global uncertainty and slow decision-making are expected to remain headwinds through the second half of 2025. This is particularly evident at the premium end of the market, where tenants have been reluctant to commit to long-term space requirements amid a volatile global environment.

“Despite these challenges, Perth remains a structurally resilient market, well-positioned for continued growth. Beyond traditional expiry-led demand, we anticipate strong leasing activity from: SMEs, capitalising on flexible space opportunities, legal and Government sectors driven by ongoing policy and regulatory expansion, engineering and mining firms - particularly those linked to the rapidly expanding gold sector. These sectors are expected to underpin demand and help offset broader global economic uncertainty.”

Canberra
Troy Markos, Director Office Leasing

“The first half of 2025 was impacted by the Federal Election which slowed occupier activity and decision making across both private sector and Commonwealth Government until there was certainty around an outcome.

“Canberra’s core markets of Civic and Barton/Forrest are driving the majority activity. This is amplified in Barton which is experiencing some of the lowest levels of vacancy in recent history with limited new supply forecast that will move the needle. This has resulted in healthy face rental growth, as much as 15% in some cases, with occupiers not too concerned about the rental level but more focused on the right building and reducing capital outlay. Fitted suites are almost a necessity for availability <500sqm and we are seeing larger occupiers, even Government, placing more weight on fitted options.

“New developments have seen increased interest with the likes of 1A Constitution Avenue and Anzac Park East under construction. Transactions concluding in H2 will see the rental ceiling hit new heights supporting occupier sentiment to pay the increases economic rent for the right product. This will only support the uplift in face rents across all grades.

“The Commonwealth has been one to watch with the highest Australian Public Servant (APS) headcount ever, but that has not necessarily translated into positive absorption which it historically has pre-covid. We have seen footprints reduce with a continued densification strategy and confidence around occupy levels dictating a reduction in size requirements. As a result, some entities are consolidating back into existing leased footprints or new requirements forced to focus on existing Commonwealth backfill.

“This densification trend coupled with new Net Zero NABERS requirements of minimum 5.5 Star NABERS Energy ratings will result in Commonwealth relocations into better quality A-Grade stock, especially if existing assets cannot easily accommodate the need to downsize or conform with NABERS requirements.”

Western Sydney
Mark Martin, Director, Office Leasing

“Like most markets in Australia, fitout is ‘King’ with leasing in Western Sydney. Without fitout, whether recycled or speculative, leasing interest is significantly diminished. With prospective tenants still expecting additional rental rebate incentives, the challenge for landlords has become: at what price can a quality fitout be provided. With much of local demand being from smaller, sub-200sqm organisations, the lion’s share of speculative suites that are being built are within this size range.

“Overall, tenant demand in H1 started positively in the first few months, but was then notably down from mid-March onwards. Fewer enquiries, with fewer inspections, and lengthy decision making.

“Although leasing activity and tenant demand has been reduced, what has become evident is an increasing shortage of contiguous quality A-grade space in excess of 1,500sqm or so. Were a tenant to be seeking 2,000-3,000sqm+ within the next 12-18 months, the number of options is minimal. This lack of A-grade space will become more pronounced in the short-medium term.”

“Effective rents remain challenged given the overall weight of the lessee orientated market, and there are no immediate signs this will turn in the short term.”