Sydney CBD vacancy remained broadly stable at 13.3% in Q2 2026, although vacancy tightened across all three grades over the quarter. Premium vacancy recorded the largest reduction, falling to 7.7%, while A-Grade vacancy declined to 16.0% and B-Grade vacancy declined to 15.8% (although it remains 1.4 percentage points higher YoY).

The tightening in Premium and A-Grade has been supported by positive demand for higher-quality space, alongside limited new supply and withdrawals of existing stock. Availability is particularly constrained within Core Premium buildings, where vacancy is now below 7%, despite overall CBD vacancy remaining elevated

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On the supply side, no new office space is expected to be delivered in 2026, with the next major supply wave concentrated in 2027. 55 Pitt Street (63,000 sqm), Atlassian Central (57,000 sqm) and Chifley South (53,000 sqm) are currently under construction, with these projects collectively more than 60% pre-committed.

With approximately 173,000 sqm of new space due in 2027, vacancy is expected to increase through H2 2027 and into 2028, as both available space within the new developments and backfill from relocating tenants enters the market. Beyond 2027, the development pipeline is limited, with challenging development conditions including construction costs restricting the next wave of new supply.

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Sublease availability in the Sydney CBD remains low at approximately 0.7% of total stock, below historical averages. Availability increased only marginally over the first half of 2026, from approximately 35,000 sqm to 37,000 sqm.

Larger availabilities remain concentrated in a relatively small number of buildings, with a recent listing in 200 Barangaroo Ave contributing to available sublease space.

Fitted sublease opportunities remain available, although the overall volume of space remains limited and is not materially adding to broader market vacancy.

The Sydney CBD recorded 18,715 sqm of positive net absorption in H1 2026, with demand heavily weighted towards Premium stock. Premium recorded 19,388 sqm of positive absorption, while A-Grade was broadly flat at 434 sqm and B-Grade recorded -5,418 sqm.

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 are broadening tenant interest outside the Core. The Western Corridor recorded 12,329 sqm of positive net absorption in H1 2026, supporting the trend of tenants seeking a better balance of building quality, amenity and commercial terms.

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

- New Chambers – 126 Phillip St - 1,835 sqm

- BecaPty Ltd – 400 George St - 1,833 sqm

- QUBE Research – 88 Phillip St – 1,830 sqm

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

The longer-term impact of AI on office demand remains uncertain, but in the short term it is unlikely to translate directly into significantly smaller footprints. Growth in AI and technology businesses is creating new roles and new sources of office demand, while other organisations are restructuring teams as automation becomes more embedded.

As Consultant Michael Ly notes, AI is changing the structure of tech teams as much as the technology itself. This does not necessarily mean less space, but it can change the type of space businesses need, from desk numbers and meeting rooms to project areas, training and customer-facing space.

For occupiers, the longer-term impact of AI is therefore likely to be as much about how space is used as how much space is required. As roles and team structures evolve, flexibility within both the workplace and lease will become increasingly important when planning future office requirements.

In H2 2025, demand was concentrated in A-Grade, as tenants pursued quality space at a more competitive price point. In H1 2026, the data shows both flight to quality and flight to value, with Premium recording 19,388 sqm of positive net absorption.

Importantly, quality demand is not confined to the Core. The Western Corridor recorded 12,329 sqm of positive net absorption, close to the Core at 13,491 sqm, as Premium buildings in the precinct provide tenants with access to quality space on more competitive commercial terms.

For occupiers, this means flight to value does not necessarily require a compromise on grade. Premium options outside the Core can offer the balance of building quality and stronger leasing terms that tenants are increasingly seeking.

Tech Central continues to strengthen as Sydney’s major technology and innovation precinct, supporting a $42 billion economy, almost 100,000 jobs and around 4,300 businesses. The precinct already includes major technology occupiers such as Atlassian, Canva, Block, SafetyCulture and Rokt, alongside universities, research institutions and a growing startup ecosystem.

The opening of the Tech Central Innovation Hub at 477 Pitt Street adds around 8,000 sqm of flexible space for startups and scale-ups, while the NSW Government has committed $38.5 million to further develop the precinct. Atlassian Central will provide another major anchor as it approaches completion.

The Tech Central is increasingly becoming a genuine alternative to the traditional CBD Core, particularly for businesses seeking proximity to technology talent, universities, startups and other innovation-led organisations.

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.

Sydney’s legal sector continues to favour Premium accommodation, with recent moves into 33 Alfred Street by Allens and Lander & Rogers, and Corrs into Quay Quarter Tower, reinforcing the preference for high-quality, well-located assets. This trend is continuing into the next development cycle, with MinterEllison and Baker McKenzie pre-committing to 55 Pitt Street, and Gilbert + Tobin to Chifley South, both due for completion in 2027.

Our study of 75 mid- and top-tier Sydney law firms found that around 60% had upsized and 39% had downsized, with average tenure in the same building of approximately 7.5 years. The latest pre-commitments appear to be following the same trend, with firms securing larger footprints as part of their next move.

For legal occupiers, these commitments reinforce the importance of getting building quality, location and flexibility right from the outset, particularly when leasing decisions can shape workplace requirements for much of the next decade.

Sustainability remains a core filter for office occupiers, particularly larger corporates with formal decarbonisation targets. For many local and offshore tenants, strong ESG credentials are increasingly treated as a baseline requirement rather than a “nice to have”.

Tenants continue to favour buildings 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.

‍This is narrowing the pool of suitable accommodation and increasing the divide between newer or comprehensively refurbished assets and older 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 remained elevated at 18.9% in July 2026, marginally down from 19.0% in January. Based on total stock of approximately 5.28 million sqm, this represents close to one million sqm of vacant office space. Net absorption improved to approximately 29,500 sqm in H1 2026, driven by positive Prime demand, following several years of weak or negative absorption.

Melbourne has experienced periods of substantial new supply since 2020, coinciding with weaker tenant demand and rising vacancy. While the development pipeline is now moderating, further supply remains, including 435 Bourke Street, with approximately 60,000 sqm expected in 2026. New development is relatively limited thereafter until the next major wave of projects expected from 2031–32.

Near-term vacancy pressures are expected to persist. The Victorian Government recently announced plans to offload space across 121 Exhibition Street, 8 Nicholson Street and 50 Franklin Street, contributing to approximately 100,000 sqm of government backfill expected across the CBD. This will add to an already substantial pool of available space and place further pressure on vacancy despite the slowdown in new construction.

We expect Melbourne CBD vacancy has not yet peaked, with further backfill and historically weak tenant demand likely to place upward pressure on vacancy through to 2028. Thereafter, stock withdrawals and limited new construction may support a gradual recovery, although this will remain dependent on tenant demand and the absorption of existing vacant space before the next development cycle begins from around 2031.

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Melbourne CBD sublease vacancy declined materially during H1 2026, from approximately 64,000 sqm in January to 45,000 sqm in July, equivalent to around 0.9% of total stock. Availability is now below the historical average. Although Melbourne continues to record the highest volume of sublease space among the major Australian CBD markets.

Sublease space remains an attractive alternative to direct leasing, typically offering discounted effective rents, existing fitouts and shorter lease terms. This continues to provide cost savings and flexibility, particularly for tenants seeking near-term solutions or project space.

Melbourne CBD demand improved through H1 2026, with total net absorption of approximately +29,500 sqm, following several years of weak or negative demand. By grade, demand was heavily concentrated in A-Grade, which recorded +53,460 sqm of net absorption. Premium (-14,983 sqm), B-Grade (-4,990 sqm) and C-Grade (-6,913 sqm) all recorded negative absorption.

At a precinct level, the Eastern Core (+18,911 sqm) and Flagstaff (+15,455 sqm) recorded the strongest net absorption, while the Western Core (-10,634 sqm) was the weakest performing precinct. Docklands recorded modest positive absorption of approximately +1,500 sqm.

The concentration of demand within A-Grade highlights the continued preference for quality accommodation, while negative absorption across Premium and secondary grades demonstrates that demand remains uneven across the market.

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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  

Landlords are increasing investment in third-space amenity across Melbourne CBD buildings in response to growing demand from tenants and employers for greater functionality outside the traditional tenancy. Larger shared boardrooms are increasingly being replaced by smaller meeting rooms offered on a pay-per-use or first-come, first-served basis, giving tenants access to additional meeting capacity without carrying that space within their permanent footprint.

Demand is also broadening beyond meeting and collaboration spaces toward wellness-focused amenity. Mini gyms, recovery areas and purpose-built rooms for rest, faith, parents and first aid are becoming more common, alongside continued investment in end-of-trip facilities including bike storage, showers and EV charging.

For tenants, these facilities can reduce the need to replicate certain functions within their own tenancy while supporting employee experience and workplace attendance. As employers place greater emphasis on attracting staff into the office, the quality and functionality of third-space amenity is becoming a more important consideration when comparing buildings.

The Victorian Government’s proposed work-from-home legislation remains a key uncertainty for Melbourne’s office market. The Bill, which would provide eligible employees with a right to work from home two days per week where reasonable, has passed the Legislative Assembly but remains before the Legislative Council. Following a change in Premier, implementation has been delayed from September 2026 to July 2027 to allow further consultation with the business community. The Government has indicated it still intends to pass the legislation before the November 2026 state election.

The timing remains significant for Melbourne, where CBD vacancy sits at 18.9% and office attendance continues to influence occupier space requirements. This is particularly relevant given the Victorian Government’s own consolidation of its CBD footprint, which is expected to contribute approximately 100,000 sqm of backfill across the market.

The legislation may have longer-term implications for workplace utilisation and future space requirements. As leases approach expiry, businesses are increasingly assessing their footprint against actual office attendance, and a legislated right to work from home could further influence these decisions. This may contribute to continued consolidation and reduced space requirements, adding further backfill to a market already carrying elevated vacancy.

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.”

H1 2026 leasing data supports this trend, with 53,460 sqm of positive net absorption, while Premium (-14,983 sqm), B-Grade (-4,990 sqm) and C-Grade (-6,913 sqm) all recorded negative absorption.

This demand is occurring against significant existing availability. At the beginning of the year, A-Grade vacancy stood at 20.6%, representing approximately 546,000 sqm, while Prime stock accounted for almost three quarters of all vacant space across the CBD. The depth of available A-Grade accommodation has created strong competition between landlords, providing tenants with access to higher-quality buildings, strong incentives and increasingly competitive fitted options.

The combination of significant availability and competitive terms is allowing tenants to achieve better value for their occupancy cost, with higher-quality accommodation becoming increasingly attractive relative to lower-grade alternatives. The strong H1 absorption indicates tenants are taking advantage of these conditions, although A-Grade remains a highly competitive market for landlords rather than a constrainedmarket for tenants.

From 1 January 2026, the Melbourne congestion levy on off-street parking rose sharply, with Category 1 (CBD) rising from $1,750 to $3,030 per bay per year and Category 2 increasing from $1,240 to $2,150. The Category 2 area has also expanded into Burnley, Cremorne, South Yarra, Windsor and parts of Richmond, Abbotsford and Prahran, while the Queen Victoria Market area moved to the lower Category 2 rate.

For tenants with significant parking requirements, the increase can materially affect total occupancy costs where the levy is passed through via parking charges or other property costs. The expansion is particularly relevant when comparing CBD and fringe locations, as several inner-eastern precincts that previously sat outside the levy are now subject to the Category 2 rate. Parking requirements and associated costs should therefore be considered alongside rent, incentives, transport access and staff catchments when assessing future leasing options.

Fitted space continues to lease ahead of vacant space, with a clear hierarchy emerging in the sub-300 sqm market. Well-designed, modern spec suites are leasing faster than older or more generic fitouts, as smaller tenants prioritise quality, convenience and avoiding upfront fitout costs.

Older spec suites are still leasing, but typically require stronger incentives or landlord contributions towards refresh works to compete with newer, better-presented options. For tenants, the depth of fitted options provides an opportunity to compare not only rental terms, but the quality and usability of the existing fitout and the overall cost of occupation.

ESG credentials remain an important consideration for Melbourne tenants, particularly larger corporates with sustainability targets and reporting requirements. Buildings with strong 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.

The significant availability of A-Grade space is providing tenants with greater access to buildings with stronger ESG credentials without necessarily moving to the Premium end of the market. This aligns with the broader shift toward A-Grade in H1 2026, which recorded +53,460 sqm of net absorption while B-Grade demand remained negative.

For tenants, ESG is increasingly considered alongside building quality, amenity and overall value rather than in isolation. The depth of available A-Grade stock means tenants can be more selective and incorporate sustainability requirements into a broader assessment of workplace quality and occupancy cost.

Brisbane CBD vacancy decreased 1.6 percentage points over the quarter to 10.2%. Premium vacancy recorded the largest decrease, falling 4.4 percentage points to 3.8%, while A-Grade vacancy remained unchanged at 10.7%. B-Grade vacancy also tightened materially, decreasing 6.5 percentage points to 8.3%.

PCA data recorded 38,785 sqm of positive net absorption over the six months to July 2026, significantly above the historical average of 10,165 sqm. Demand was concentrated in A-Grade (+25,384 sqm), followed by B-Grade (+10,622 sqm) and Premium (+7,756 sqm). C-Grade was the only segment to record material negative demand at -6,916 sqm.

For tenants, the near-term supply pipeline remains limited, with no major new CBD development completing in 2026. The next significant additions are 450 Queen Street in 2027 and Waterfront Brisbane North Tower in 2028, while tenant relocations will progressively release backfill space across existing assets.

Upcoming supply:

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

- Waterfront Brisbane (North Tower) – 73,000 sqm – Completion 2028 – ~51,000 sqm pre-committed

Sublease availability in the Brisbane CBD tightened further to approximately 0.4% of total stock (~10,000 sqm), down from approximately 0.7% (~16,000 sqm) in January 2026. This remains well below the long-term average of approximately 22,000 sqm.

The decline in sublease availability, alongside 38,785 sqm of positive net absorption, indicates limited occupier contraction across the CBD. Sublease remains a small component of overall vacancy, with available space continuing to be absorbed or withdrawn from the market.

Tenant demand strengthened over the first half of 2026, with Brisbane CBD recording approximately 38,800 sqm of positive net absorption, significantly above the historical six-month average of 10,165 sqm. This takes net absorption to approximately 48,800 sqm over the past 12 months.

Demand was heavily concentrated in Prime assets, which recorded 33,100 sqm of net absorption during H1 2026. PCA data shows A-Grade (+25,384 sqm) accounted for the largest share of demand, followed by B-Grade (+10,622 sqm) and Premium (+7,756 sqm). Secondary stock recorded 5,600 sqm of positive absorption, its first positive result in three years.

The relocation of CIMIC from the Fringe into 12 Creek Street contributed to the positive result. Demand is expected to remain positive, with potential additional requirements emerging as planning for the 2032 Olympics gains momentum.

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

- Christie System Services – 225 Edward St – 3,456 sqm  

- Conoco Phillips – 123 Albert St – 3,000 sqm

- ACIMIC – 12 Creek St – 8,000 sqm

- Legal Aid – 400 George St – 6000 sqm

The development of Waterfront Brisbane will introduce two new office towers comprising approximately 140,000 sqm, materially changing the riverfront skyline and outlook from a number of existing CBD buildings. The scale and positioning of the towers will impact views not only from buildings directly behind the development, but potentially from tenancies with oblique views across or alongside the site.

For tenants currently benefiting from river, Story Bridge or broader eastern views, this is an important consideration when entering a new lease or approaching a renewal. Natural light and outlook are factors that can influence rental rates and the relative value of a tenancy. Tenants should therefore consider how these attributes may change over the proposed lease term.

Tenants potentially affected should use the development as an opportunity to review their longer-term space requirements and workplace strategy before committing to their existing accommodation. Engaging a tenant representative early can help understanding the potential impact on their tenancy, assess alternative options and ensure future changes to views and amenity are appropriately reflected in upcoming lease and rental negotiations.

Speculative fitouts continue to provide ready-to-occupy options across the Brisbane CBD, although many remain tailored towards the traditional legal and resources sectors, with private offices and enclosed rooms positioned along perimeter glazing.

These layouts can generally be tailored to suit different workplace requirements, particularly where tenants engage before construction is complete. Early engagement can provide greater input into layout and design, allowing occupiers to achieve a more open, collaborative or business-specific solution while retaining the cost and timing benefits of a speculative fitout.

Elevated fitout and construction costs continue to make fitted space a key consideration for tenants looking to reduce upfront capital expenditure and shorten delivery timeframes. However, the quality of existing fitted stock is becoming increasingly important as Brisbane CBD vacancy tightens.

For smaller occupiers seeking approximately 200–400 sqm, the quality of existing fitted options remains mixed. Many available fitouts are older, while some require meaningful modification before they can provide a contemporary workplace. Speculative suites continue to provide an alternative, although design and quality can vary considerably between buildings.

For tenants, this creates a distinction between fitted space and genuinely move-in-ready space. Occupiers should assess the age, condition and suitability of an existing fitout alongside the commercial terms, particularly where modification costs could materially reduce the benefit of taking fitted accommodation.

Brisbane’s future supply pipeline remains limited, with no major new CBD development completing in 2026 and the next significant additions being 450 Queen Street in 2027 and Waterfront Brisbane in 2028. At the same time, vacancy has tightened to 10.2%, with Premium vacancy falling to just 3.8% and strong positive absorption recorded during the first half of 2026.

For tenants, particularly those requiring larger contiguous areas, this is increasing the importance of early market engagement and forward planning. With limited new development and tightening availability across quality assets, occupiers approaching lease expiry should consider future backfill and development opportunities earlier to preserve choice and negotiating leverage.

Secondary assets are becoming increasinglycompetitive as availability tightens across the higher end of the market.B-Grade vacancy fell from 14.8% to 8.3% over the quarter, while PCA recorded10,622 sqm of positive B-Grade net absorption during the first half of 2026.

For tenants, upgraded B-Grade assets canprovide a viable alternative to increasingly constrained Prime accommodation,particularly where buildings offer quality fitouts, improved amenity and alower occupancy cost. However, the Secondary market remains varied, making building quality and capital investment increasingly important when assessingvalue.

Sustainability and building performance remain important considerations for corporate and government occupiers, with NABERS ratings, energy efficiency and broader ESG requirements increasingly forming part of tenant shortlisting criteria.

For tenants, sustainability is being considered alongside occupancy cost, building amenity and workplace quality, contributing to greater differentiation between upgraded assets and older buildings where capital investment and environmental performance remain limited.