Australia’s national office vacancy rate has climbed from 15.2 per cent to 15.9 per cent over the six months to January 2026, as a surge in new office completions lifted available space across the country’s biggest markets.
According to the Property Council of Australia’s latest Office Market Report, the increase was led by a supply-driven rise in both CBD and non-CBD areas.
Non-CBD vacancy grew more sharply, from 17.3 per cent to 18.5 per cent, while CBD vacancy edged up from 14.3 per cent to 14.8 per cent.
Property Council Chief Executive Mike Zorbas said the figures reflected a cyclical peak in supply that is expected to slow in coming years.
“Over the next five years, a lack of new supply is set to underpin a recovery in office,” Zorbas said.
“What we’re seeing nationally is a supply-led increase in vacancy from projects that started three years ago and are largely pre-committed.”
He said the completion of those projects had temporarily pushed vacancy levels higher.
“The end phase of this cycle’s new completions has lifted vacancy across our major markets, while the appetite for high-quality office space continues to improve,” he said.
“This is now the fourth consecutive six-month period of positive demand based on the recovery of interest in prime office space.”
New supply contributed 1.2 and 1.6 percentage points respectively to the increase in CBD and non-CBD vacancy over the period, outweighing the impact of withdrawals and tenant demand.
“Demand for CBD office space is continuing its recovery from negative demand levels seen in mid-2023, while demand in non-CBD markets also increased but remained in negative territory for a second consecutive period,” Zorbas said.
He noted that tenant activity is increasingly centred on premium-grade buildings.
“New completions are attracting tenants, and the data shows that where high-quality space comes online, we consistently see stronger leasing follow,” he said.
“The flight to quality persists – in the Sydney CBD, demand was concentrated entirely in premium and A grade space, with all secondary grades recording negative demand.
“Tenants are making deliberate choices – they’re backing quality, location and performance and this is where we’re seeing demand show up first.”
Among the capital cities, Hobart continued to record the tightest CBD vacancy at 5.2 per cent, followed by Canberra at 10.2 per cent.
Perth and Melbourne were the only CBDs above the national average, though Perth recorded a slight decline, from 17 per cent to 16.9 per cent. Melbourne’s vacancy rose to 19 per cent.
Sublease vacancy continued to fall across most markets, extending a steady downtrend of the past three years.
Only Melbourne remained above its historical sublease average.
Looking ahead, new construction is expected to taper off sharply.
Over the next three years, gross office supply will remain well below the long-run average, with completions expected to average between 100,000 and 120,000 square metres per half-year — roughly half the historical figure.
Strong pre-commitments are already in place for upcoming developments in Sydney (61 per cent) and Canberra (57 per cent), with more than a third of future supply in Melbourne and Brisbane accounted for.
“With supply moderating and a high level of pre-commitment in the pipeline, the medium-term outlook is more balanced than the headline vacancy rate alone would suggest,” Zorbas said.
