National office vacancy rate hits 16.1% as empty space reaches post-pandemic high
National office vacancy rates lifted to 16.1 per cent in the six months to June – the highest since the COVID pandemic and the recession years of the early 1990s.
Property Council of Australia data released today shows vacancy rates increased from 15.8 per cent in January and have been rising since 2020, meaning there are now more empty offices than when the pandemic forced workers to their home offices.
While some locations recorded tightening vacancy rates, including west Perth, Crows Nest and St Leonards, and the Gold Coast, the new figures showed average increases across both non-CBD and CBD markets.
Non-CBD markets recorded a vacancy rate of 18.9 per cent, with the biggest jumps in Melbourne’s Southbank and Sydney’s Macquarie Park, Parramatta and Chatswood.
Sydney and Melbourne improve while Canberra deteriorates
Of the CBD markets, Canberra’s vacancy rate grew by more than 4 per cent and Adelaide’s rose by less than 1 per cent. Four capital cities – Melbourne, Sydney, Perth and Brisbane – recorded slight falls of less than 2 per cent.
Lower vacancy rates in these cities are early signs of office market stabilisation after a prolonged period of oversupply, said Mike Zorbas, Property Council chief executive.
“The office market has moved from the correction phase to the recovery phase, but it remains a story of quality and location,” he says.
“Major occupiers are seeking the best buildings. Businesses in general continue to seek workplaces that support collaboration, attract talent and provide the offerings people value.”
Vacancy rates are expected to drop in coming years as sharp rises in construction costs slow development activity. Property Council research found just 176,303 square metres of office space was completed nationally during the first half of 2026, which is the lowest level since July 2017. At 167,171 square metres, even fewer offices are expected to come onto the market in the six months to December.
The looming supply shortage is most evident in Perth’s CBD, which was the only market to record an empty pipeline of new development through to 2028.
Flight to quality continues to boost premium office demand
In perhaps the best news for the property market, there is plenty of demand for premium and A-grade buildings. As the ‘flight to quality’ continues with tenants searching for the best buildings on offer, premium grade vacancy decreased by 1.2 per cent to 10.2 per cent.
Positive demand for office space was recorded in Brisbane, Perth, Melbourne and Sydney CBDs. Brisbane CBD had the strongest net absorption nationally during the six-month period with 38,785 square metres leased, followed by Perth CBD with 27,528 square metres and Melbourne CBD with 26,779 square metres.
Of all the CBD office markets, Canberra’s is languishing. Its net demand rate fell by 3 per cent, and at almost 15 per cent, the capital city’s vacancy rate is at its third highest on record.
The next six months do not look promising, but the next two years could see the withdrawal or repurposing of older buildings, said Aaron Bruce, CBRE’s head of office leasing, ACT.
“Overall tenant demand and transactions in the back half of the year will continue to be challenging as the market deals with the headwinds of large tranches of backfill stock starting to filter back into the market,” he says.
“At the same time, we are starting to see the first significant wave of sale campaigns of office assets in the ACT market in the better part of 24 months. A number of these assets have current or future impending vacancies, and many are watching intently to see if any may be withdrawn or considered for alternate use.”
