Across the country, major cities are beginning to recover from previously high office vacancy rates as tenants favour high-quality buildings instead of older or lower-grade properties. While Sydney and Melbourne have been most affected by rising supply and economic uncertainty, prime office locations are now experiencing tighter vacancy conditions. This is pushing businesses to act quickly before desirable spaces are no longer available.
In recent years, many central business districts recorded increased vacancies due to more flexible remote work arrangements, escalating construction costs and broader economic challenges. However, demand has now pivoted towards premium and A-grade office buildings. Leasing experts note that businesses are seeking modern, well-located spaces, even though the development of new office stock is becoming harder due to high build costs and narrower profit margins.
Currently, tenants are targeting top-tier premises in cities such as Sydney and Melbourne, where limited new premium supply is pushing companies to consider A and B-grade alternatives. Areas like St Kilda Road and Docklands in Melbourne are under pressure. However, a small recent decrease in vacancies suggests a stabilisation in the market. In both Adelaide and Melbourne, CBD leasing activity has increased, supported by few new market entrants and sustained demand.
Looking forward, a shortfall in premium office supply could persist through to 2030. While face rents are rising across the board, particularly in Perth, Adelaide and Melbourne, incentives remain common and major relocation decisions are taking longer. Although broader economic pressures such as tariffs and fit-out costs continue to influence the market, improving business confidence and stable interest rates may encourage more tenants to act sooner.
