Australia’s office vacancy rate has edged higher.
New supply of premium buildings has been outpacing demand, even as businesses continue to favour high-quality CBD space.
The Property Council of Australia’s July 2025 Office Market Report shows CBD vacancy rose from 13.7% to 14.3% in the first half of the year. More than 200,000 square metres of new space was delivered across the country in just six months, adding to the pressure.
Over the past five years, CBD markets have absorbed 2.6 million square metres of new supply, equal to almost 14% of total office stock.
Premium offices driving demand
The strongest trend remains the “flight to quality”, with businesses prioritising top-tier office space.
In the past six months, occupied Premium office stock increased 2.7%, up 7% year-on-year. In contrast, A Grade grew just 0.1%, while B, C and D Grade offices all recorded declines.
Premium and A Grade are considered “prime” buildings, while B, C and D fall into the “secondary” category.
Property Council Chief Executive Mike Zorbas said the data reflects tenants’ rising expectations.
“Businesses are looking for the best spaces for their people, and they’re seizing opportunities to move into premium buildings in prime CBD locations,” he said.
Sublease market tightens
Sublease availability has also shifted sharply. Vacancy in this category dropped to 0.8%, the lowest level since July 2020 and well below historical averages.
During the pandemic, sublease space surged as companies downsized. The latest figures show a near-complete reversal, with tenants retaining space and demand for fitted, flexible offices improving.
New supply ahead
A further 131,697 sqm of office space is due to be delivered to CBDs across the country in the next six months, spread across:
- Adelaide: 23,170 sqm
- Canberra: 16,000 sqm
- Melbourne: 66,127 sqm
- Sydney: 26,400 sqm
Outside CBDs, vacancy also lifted slightly, from 17.2% to 17.3%, reflecting weaker demand against limited new supply. Nationally, overall office vacancy rose from 14.7% to 15.2%.
Vacancy by city
The report highlights diverging trends across Australia’s capitals:
- Canberra: 9.2% → 10.7% (supply exceeded demand)
- Brisbane: 10.2% → 10.7% (similar pattern to Canberra)
- Sydney: 12.8% → 13.7% (driven by a strong supply pipeline)
- Adelaide: 16.4% → 15% (vacancy fell on the back of solid demand and limited new supply)
- Perth: 15.1% → 17% (significant new supply and negative net absorption)
- Melbourne: 18% → 17.9% (small improvement due to building withdrawals and tenant take-up offsetting new completions)
The bottom line
While overall vacancy has inched higher, demand is firmly concentrated in Premium and A Grade offices, leaving older, lower-quality buildings under pressure.
The national picture is one of a market split in two:
- Prime buildings are attracting tenants and investment.
- Secondary stock continues to lose occupancy and faces ongoing structural challenges.
With more supply set to hit the market in the coming months, landlords of secondary-grade offices may find it harder to compete unless they refurbish or reposition their assets.
Looking for space? Speak to the team at Niche Advisory today.