The Property Council of Australia's biannual July 2025 Office Market Report shows the Australian CBD office vacancy rate crept up slightly from 13.7 to 14.3 per cent over the first six months of the year.
This is in part due to a continuing stream of new high-quality office supply hitting the market, with over 200,000 sqm of supply added in the last six months, outstripping the positive levels of demand for office space.
Australia's CBDs have seen plenty of supply over the last five years, with 2.6 million sqm going live, totalling 13.7 per cent of the total office space in our cities.
In the past six months, the amount of occupied Premium office stock increased by 2.7 per cent, which is a seven per cent rise compared to the same time last year.
This growth is much stronger than in other office grades. Grade A occupied stock rose by 0.1 per cent, while Grades B, C and D all saw declines – down 0.5 per cent, 0.3 per cent and 0.4 per cent, respectively.
Office buildings in Australia are graded in terms of quality, with Premium and A Grade considered 'prime', with B, C and D grades considered 'secondary' and of lesser quality.
Property Council Chief Executive Mike Zorbas said the slew of new office supply over the last few years is part of a refresh of office spaces in our cities as tenants demand higher quality spaces.
"The continuous supply of new high-quality office space in our CBDs is a response to businesses searching out great places for their employees to work in.
"Tenants are capitalising on opportunities to occupy premium buildings in prime CBD locations, with premium space continuing to see higher demand levels than lower-grade buildings.
"We have seen a year and a half of positive demand for office space, with more businesses taking up office space than leaving behind.
"Much of this demand is centred on Premium and A Grade buildings, with B, C and D grade office buildings experiencing negative demand over the last six months."
Sublease vacancy in the CBDs decreased to 0.8 per cent, the lowest level since July 2020, and is a 0.6 per cent decrease from the recent highs in July 2021.
Sublease space contributes to overall office vacancy as it typically entails larger companies leasing out unused portions of their office space to other tenants.
"Pleasingly, we have seen a notable decline in the sublease space over the last two years, with every city recording sublease vacancies below their historical average," Mr Zorbas said.
"Sublease space in our CBDs is at its lowest point in nearly five years after rising during the pandemic."
Over the next six months, 131,697sqm of supply is expected to go live in Australia's CBDs. This is spread out across Adelaide (23,170sqm), Canberra (16,000sqm), Melbourne (66,127sqm) and Sydney (26,400sqm).
Low supply and slightly negative demand drove a slight vacancy increase in the Non-CBD market from 17.2 to 17.3 per cent. The overall Australian office vacancy increased from 14.7 to 15.2 per cent.
Office vacancy by city
- Canberra rose from 9.2 to 10.7 per cent, due to large levels of supply outweighing the levels of positive demand.
- Brisbane rose from 10.2 to 10.7 per cent, as supply outstripped demand.
- Sydney rose from 12.8 to 13.7 per cent, this is due to high levels of supply outstripping demand.
- Adelaide fell from 16.4 to 15 per cent, thanks to positive demand and low supply.
- Perth rose from 15.1 to 17 per cent, which is due to large amounts of supply and negative net absorption.
- Melbourne fell from 18 to 17.9 per cent as demand and withdrawals outstripped the small amount of supply that came online.
