Pleasure and Pain in Australia’s National 2026 CBD Office Markets

The Property Council of Australia’s January 2026 Office Market Report shows Australia’s office market has moved into a supply-led phase, with national vacancy rising to 15.9% as the final wave of new completions flows through the market. The headline figure masks a much more nuanced story: tenants are still active, but they are increasingly selective, prioritizing quality, location, amenity, and building performance.

Across the major CBDs, the “pleasure and pain” dynamic has shifted. Sydney is stabilizing after a period of elevated vacancy, Melbourne remains the most challenged capital-city CBD with vacancy around 19%, Brisbane has tightened considerably from earlier-cycle highs, and Perth continues to benefit from Western Australia’s economic momentum and resource-sector demand.

The common thread in 2026 is a flight to quality. While national vacancy remains elevated, demand is strongest for premium and A-grade assets that support workplace experience, staff attraction and operational performance. With new supply expected to slow materially in Sydney, Brisbane and Perth, tenants with upcoming lease events should not assume today’s incentives and choice will remain available indefinitely.
For occupiers, the market is no longer simply landlord-friendly or tenant-friendly by city. It is increasingly asset specific. The best buildings are tightening first, while older or poorly located secondary stock faces a more difficult leasing environment.
Now, more than ever, organisations need independent and professional tenant representation to navigate a favorable passage in local markets and utilize their expertise in negotiation to save time, mitigate risk, maximize savings and, ultimately, add to an organization's brand and structure.

‍
Sydney – Stabilising, but Quality Space is Tightening

Sydney CBD Office Market: stable headline vacancy, stronger demand for better-quality space.

Sydney’s CBD vacancy was broadly stable at around 13.8% at the end of 2025, only marginally above mid-year levels. The headline vacancy rate remains above the long-term average, but the leasing story is improving as occupiers centralize into the CBD and focus on better-quality accommodation.

In 2026, no major new office supply is expected to be delivered into the Sydney CBD, and future development activity is expected to slow. This creates a window where existing prime stock can tighten quickly if demand continues to improve.
Tenants still have options, but the best-located premium and A-grade buildings are attracting the strongest enquiry. Incentives remain part of the negotiation, although rising face rents and improving demand mean net effective rents are moving upward.

What tenants should do in 2026

Tenants should start lease strategy early, test both renewal and relocation options, and use competitive tension while it still exists. For occupiers seeking premium space, delaying decisions may reduce choice as new supply remains limited.
The opportunity is strongest for organisations that can be flexible on location, timing and fit-out delivery. Well-structured negotiations can still secure incentives, but the strongest buildings are becoming more competitive.

‍Flexible and small-space demand remains active

The sub-1,000 sqm market remains resilient, with smaller occupiers continuing to seek fitted, flexible and high-amenity options. This segment is particularly sensitive to speed, cost, and workplace quality.
For smaller businesses, spec suites, managed workspaces and fitted sublease options can provide a practical bridge between flexibility and long-term occupancy certainty.

So, there’s no need to stay put, give into high rents from aggressive landlords or agree to unfavorable leases: there’s great value in the short-term as refurbished ‘backfill’ spaces can be let with incentives.

Small businesses can consider an upgrade

The story for small businesses and start-ups is a little different: office spaces in the sub-500 sqm range were leased swiftly, and there are fewer options in Sydney’s CBD. It’s time to think outside the office and explore more creative solutions.
Why not upgrade to a bigger space where there are more options and incentive-based tenancies? It wouldn’t even be more of a financial burden if you shared space. No wonder co-workspaces have grown by 40% per annum for the last ten years.

‍

Melbourne – Tenant Choice, but a Two-Speed Market

Melbourne CBD Office Market: elevated vacancy and selective demand.

Melbourne remains the most challenged major CBD office market in 2026, with a vacancy rate of around 19%. The increase has been largely supply-led, with new completions and backfill space lifting the headline rate rather than a simple collapse in tenant demand.
The market is increasingly two-speed. Premium and well-located A-grade assets are attracting occupiers looking to upgrade, while older secondary stock must work harder on price, incentives, fit-out and flexibility.
For tenants, this creates genuine negotiating leverage, particularly where landlords are competing to secure commitments in assets with larger vacancy. However, tenants should distinguish between abundant space and the right space: the best options can still be tightly contested.

The opportunity: leverage choice without compromising workplace quality.

Melbourne tenants should use current conditions to negotiate better premises, stronger fit-out outcomes and more flexible lease structures. Landlords of secondary assets may be open to creative deals, but occupiers should carefully assess building performance, employee experience and long-term suitability.

With national supply expected to slow after the current wave of completions, Melbourne’s tenant advantage may narrow over time if demand continues to recover, and new development becomes more constrained.

For organisations with lease events in the next 12 to 24 months, now is a favorable time to benchmark the market, compare stay-versus-go economics, and quantify the value of incentives against the cost of relocation and fit-out.
While tenant movement in the plus-5,000 sqm property range has been constrained, there are plenty of options available right down through the area ranges. Although prime offices and secondary offices experienced 16 % and 13 % rental growth respectively, vacancy rates at the top-end of the market (in both premium and A-grade) have only dipped by 6.1 %.

Options available for flexible tenants as sub-letting and subdivision become the new norm.

Much like the dynamic nature of businesses, Melbourne’s office leasing environment has become flexible and able to accommodate the needs of small businesses and start-ups.
This has opened a diverse commercial tenancy market as landlords subdivide larger properties, tapping into a range of organisations needing smaller workplaces – all these organisations need is the knowledge of where they are, and a process of negotiation to make sure it’s a perfect fit for them.

‍

Brisbane – Tightening Conditions and Rising Rents

Brisbane CBD Office Market: limited supply and improving landlord confidence.

Brisbane has moved a long way from the oversupply conditions that previously defined the market. Vacancy was around 11.8% in January 2026, up modestly from mid-2025 but still relatively low compared with earlier-cycle levels. The recent lift was mainly supply-driven, reflecting completed buildings and backfill space rather than weak underlying demand.

Tenant demand is being supported by population growth, infrastructure activity, professional services, government-related occupiers, and the city’s broader economic momentum. With future supply expected to be limited, the balance of power is shifting, particularly for well-located prime assets.

For tenants, Brisbane is now a market where timing matters. Early engagement, clear workplace briefs and disciplined negotiation are essential to avoid being caught by tightening prime vacancy and rising rents.

‍

Perth – Momentum Returns, but Deals Still Need Discipline

Perth CBD Office Market: resource-sector confidence and limited future supply.

Perth’s office market has continued to improve as Western Australia benefits from strong economic and demographic growth. Demand is being led by the mining and resources sector, with broader professional and business services also contributing to leasing activity.
While Perth remains more tenant-friendly than the tightest eastern seaboard prime markets, the absence of major new supply gives landlords more confidence in quality buildings. Occupiers should expect a more competitive environment for well-located space that supports staff attraction and long-term operational requirements.

The best outcomes will come from testing multiple options, understanding landlord motivations and securing commercial terms that balance flexibility, incentives and future growth capacity.

‍

Summing Up

In 2026, Australia’s CBD office markets are no longer moving in one direction. National vacancy has risen as new supply reaches completion, yet demand for prime space is strengthening, and the future supply pipeline is expected to be materially lower than in recent years.

The 2026 National Market Snapshot

This creates both opportunity and risk. Tenants with upcoming lease events can still secure attractive outcomes, but they need to move early, understand submarket dynamics and distinguish between headline vacancy and genuine availability in suitable buildings.
The next phase will favour occupiers that make informed, proactive decisions. The right workplace strategy should account for cost, flexibility, staff experience, building quality, and the timing of future supply.
Whatever the local market conditions, an independent tenant representative is best equipped to develop and implement a strategy that protects negotiating leverage, reduces risk and secures a workplace solution aligned with business needs.

‍

‍

Data sources include Property Council of Australia, Colliers, CBRE and LPC 2026 office market commentary.

Acknowledgements:
Property Council of Australia, 2026, Office Market Report; Colliers, 2026, Australia Office Vacancy Statistics; CBRE, 2026, Australia CBD Office Figures; LPC, 2026, Market Reports.

‍