Property Council Western Sydney Regional Director Ross Grove said the latest figures showed Parramatta was confronting a longer-term challenge in parts of its office market, particularly within older stock.
"Parramatta has now recorded overall vacancy above 20 per cent for four consecutive reporting periods, while B Grade vacancy has remained around the 40 per cent mark for an extended period," Mr Grove said.
"These are not the numbers of a market experiencing a temporary blip. They point to a structural challenge that policymakers need to confront."
The report shows overall vacancy increased by 1.4 percentage points to 23.5 per cent over the six months to July 2026, with 15,981 square metres of new supply entering the market and net absorption of minus 2,323 square metres.
While demand was mixed across the market, B Grade vacancy remained exceptionally high at 39.9 per cent despite recording positive net absorption of 2,916 square metres.
"Nearly four in every ten square metres of B Grade office space in Parramatta remain vacant," Mr Grove said.
"For years the market has been signalling that parts of the office sector are struggling to find tenants. At some point we need to stop pretending every vacant office will inevitably become an occupied office."
Mr Grove said the figures should inform the ongoing debate about the future shape of Parramatta's CBD.
"Parramatta remains Western Sydney's economic capital and will continue to be a major employment centre. Nothing in these figures changes that," Mr Grove said.
"But a successful CBD is not defined by how much land is reserved for offices. It is defined by how effectively land is being used to support jobs, investment, activity and growth."
Mr Grove said Build-to-Rent housing had an important role to play in the evolution of the city centre.
"We are facing two challenges at the same time: persistently high vacancy in parts of the office market and an acknowledged housing shortage across Sydney," he said.
"Build-to-Rent provides a practical way to address both."
Unlike traditional apartment developments, Build-to-Rent buildings remain in single ownership and are professionally managed over the long term, offering flexibility should market conditions change in future.
"Parramatta should be encouraging investment that activates underutilised sites and brings more people into the CBD, not discouraging it," Mr Grove said.
"The idea that every commercially zoned site must be preserved indefinitely for future office development becomes increasingly difficult to justify when vacancy has remained elevated for so long."
The report also shows there is no new office space in Parramatta's short-term pipeline, with all 97,265 square metres of future stock currently classified as mooted supply.
Mr Grove said the city's future success would depend on recognising changes in market demand rather than waiting for conditions that may never return.
"Parramatta has grown from a suburban centre into Sydney's second CBD because it has adapted and evolved," he said.
"The danger is not that Parramatta changes. The danger is that we ignore what the market is telling us.
"Whether it was video stores, internet cafés or call centres, successful cities evolve when demand changes. Parramatta should do the same.
"We should be focused on supporting investment, supporting housing supply and supporting the long-term vitality of the CBD. The office market data shows that doing more of the same is not a strategy."
