The Urban Developer
AdvertiseEventsWebinars
Urbanity
Awards
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
Interested in a Corporate TUD+ Membership? Access premium content, site tours, event discounts and networking opportunities
Interested in a Corporate Membership? Access exclusive member benefits today
Enquire NowEnquire
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Partner Lab
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
ADVERTISEMENT
SHARE
print
Print
OfficeLeon Della BoscaTue 04 Feb 25

Office Vacancy Rates Hold Steady Amid Supply Surge

Professionals in Sydney Office

Despite predictions of the death of CBD offices, Australian businesses are still signing leases for high-end office space, though they’re increasingly selective about what they’ll accept.

According to the January edition of the Property Council of Australia’s twice-yearly Office Market Report, the national CBD office vacancy rate remained stable at 13.7 per cent, from 13.5 per cent in the last report.

The combined CBD and non-CBD rate sits at 14.7 per cent even as the market absorbed more than 220,000sq m of new supply in the past six months.

Property Council chief executive Mike Zorbas said that “over the last 3½ years, positive demand for office space in our CBDs has been recorded in five of the last seven reporting periods”.

“We have continued to see the supply of new office space above or near the historical average, providing access to a wealth of new, high-quality office space in our cities,” Zorbas said.

“Vacancy levels continue to be driven by this large level of supply, as demand has remained positive.”

CBRE head of investor leasing Tim Courtnall said the Australian office sector performed strongly over the second half of 2024.

“While the market showed strong transaction volumes in quarter four across all major cities,” Courtnall said, “decision making remained slow”.

CBRE head of office and capital markets research Tom Broderick expects “national vacancy will peak in 2025 and begin to decline”.

Supply pipeline analysis shows 333,000sq m scheduled for completion in the next six months, exceeding the historical average of 237,554sq m.

The development pipeline extends across Sydney (83,048sq m), Melbourne (54,327sq m), Brisbane (43,700sq m), Canberra (87,011sq m), Adelaide (23,826sq m), and Perth (41,193sq m).

In NSW, Sydney’s vacancy rate increased from 11.6 per cent to 12.8 per cent following 164,552sq m of new supply.

“In the second half of 2024, we observed additional demand extending beyond the CBD core, particularly in Midtown and Western Corridor Precincts,” Cushman & Wakefield head of office leasing NSW Tim Stanway said.

CBD Vacancy Change: Six Months to January 2025

null
▲ Source: PCA

The city expects 277,048sq m of new supply by 2027, with about 50 per cent pre-committed.

Though it remained unchanged from the July 2024 report, Melbourne still holds the country’s highest vacancy at 18 per cent, with 252,627sq m expected by 2027 showing 26.9 per cent pre-commitment.

Cushman & Wakefield national director office leasing Victoria Marc Mengoni expects 2025 to be the year we “will see Melbourne’s office market rebound from the rising vacancy of the past two years, with new supply stagnant and a returned focus to quality backfill opportunities”.

Brisbane’s vacancy rate moved from 9.5 per cent to 10.2 per cent but its pipeline shows strong market confidence with 67.9 per cent of its 162,630sq m 2027 pipeline pre-committed.

Cushman & Wakefield manager office leasing Queensland Jack Neumann said, “With no new completions expected until the second half of 2025, we’re likely to see vacancy rates tighten to levels not seen in the CBD since 2012”.

Perth’s vacancy decreased to 15.1 per cent, with Cushman & Wakefield head of office leasing WA Roly Egerton-Warburton saying its “extremely tight labour market [means] major occupiers are upgrading to higher quality assets, with recent refurbishments, to help them compete for the best staff”.

Adelaide’s rate improved to 16.4 per cent, driven by demand for quality accommodation with proximity to amenities.

Smaller markets showed varied performance, with Canberra’s vacancy rates falling from 9.5 to 9.2 per cent, Hobart increasing from 2.8 to 3.6 per cent—remaining the lowest nationally—and Darwin recording the largest decrease from 14.4 to 11.9 per cent.

Cushman & Wakefield head of office leasing Tim Molchanoff said the “national leasing market continues to show a strong preference for high-quality properties, with tenants seeking better locations and a range of amenities”.

This preference is reflected in sublease vacancy rates, which decreased across both CBD and non-CBD markets, except in Melbourne and Brisbane.

Cushman & Wakefield’s head of office leasing Tim Molchanoff
▲ Cushman & Wakefield head of office leasing Tim Molchanoff.

Broderick said the supply outlook “has declined due to feasibility issues from high construction costs and interest rates”. 

Knight Frank national head of leasing Andrea Roberts said that “fitout costs, construction costs and interest rate levels prove to be the headwinds to discourage tenant moves”.

Despite these challenges, building quality and location are becoming increasingly critical, with properties offering superior amenity and transport access significantly outperforming their competitors.

This trend is particularly evident in Sydney, where the new Metro has elevated the importance of transport connectivity.

Looking ahead, Sydney and Brisbane are expected to lead rental growth nationally.

There was a surge in CBD inquiries last month, particularly in Sydney, suggesting improving market confidence despite the headwinds.

Zorbas called for government intervention to address Melbourne’s office vacancy situation, which he said was “the highest CBD office vacancy in the country”.

“We need to see active leadership from the State Government to support the vibrancy of the CBD and help Melbourne remain one of the best cities to visit in the world,” Zorbas said.

Recent Australian Bureau of Statistics data shows the first decline in remote working since 2020, dropping from 37 to 36 per cent.

However, the 2024 National Working Families Survey reveals 76 per cent of workers won’t consider jobs without flexible arrangements, forcing developers to rethink traditional office designs.

This shift is particularly crucial given research by Fenizia and Kirchmaier showing remote workers achieve 12 per cent higher productivity than their in-office counterparts.

OfficeAustraliaResearch
AUTHOR
Leon Della Bosca
More articles by this author
linkedin icon
ADVERTISEMENT
TOP STORIES
Exclusive

Brains, Guts and Determination: How Salvo Property Shapes Melbourne’s Skyline

Marisa Wikramanayake
5 Min
Fraser and Partners founder Callum Fraser
Exclusive

Saving Our CBDs: Architect’s Blueprint Paves Way for Office-to-Resi that Works

Leon Della Bosca
8 Min
Exclusive

Watchdog’s Court Loss Throws Spotlight on Union Balancing Act

Clare Burnett
6 Min
Time and Place's The Queensbridge Building at 90 Queens Bridge Street in Melbourne's Southbank.
Exclusive

Innovation Keeps Time & Place’s Southbank Skyscraper Rising

Marisa Wikramanayake
6 Min
Breathe Architecture founder Jeremy McLeod in front of his Featherweight Home design
Exclusive

Nightingale Founder’s Bid for Affordable Architectural Kit Homes

Leon Della Bosca
7 Min
View All >
West End Stockwell Vulture Street DA hero
Development

Stockwell Files Tower Plans in West End Stomping Ground

Phil Bartsch
Westmead Gene Technologies Building EDM
Life Sciences

Plans for $272m Parramatta Biomedical Facility Go Public

Clare Burnett
Novus on Victoria Chatswood
Build-to-Rent

Novus Plots Second BtR Tower for Chatswood

Renee McKeown
Novus’ plans for a shop-top build-to-rent skyscraper on Sydney’s Lower North Shore have gone public as sector continues …
LATEST
West End Stockwell Vulture Street DA hero
Development

Stockwell Files Tower Plans in West End Stomping Ground

Phil Bartsch
3 Min
Westmead Gene Technologies Building EDM
Life Sciences

Plans for $272m Parramatta Biomedical Facility Go Public

Clare Burnett
3 Min
Novus on Victoria Chatswood
Build-to-Rent

Novus Plots Second BtR Tower for Chatswood

Renee McKeown
2 Min
Exclusive

Brains, Guts and Determination: How Salvo Property Shapes Melbourne’s Skyline

Marisa Wikramanayake
5 Min
View All >
ADVERTISEMENT
Article originally posted at: https://theurbandeveloper.com/articles/australian-office-vacancy-rates-2025-property-council