Ben Churchman, Principal, Client Relations
Vacancy rates look high, but the data can be misleading
Office vacancy has risen to 15.9% nationally. This increase is primarily driven by the final wave of buildings, which began construction several years ago, now coming online. Importantly, because so much of this space is already pre‑committed, the higher vacancy rate overstates how much quality space is actually available.
Key points from the data:
- Prime and premium buildings are absorbing demand consistently
- Secondary stock is driving vacancy increases
- New supply over the next three to five years is well below historical averages
- Strong pre-commitment levels are limiting future choice, particularly in Sydney and Canberra
In other words, while vacancy rates may look high, most of that space sits in older, less desirable buildings. The supply of genuinely high-quality offices that tenants are chasing is shrinking.
Businesses are choosing quality
Across every major market, demand is concentrated in premium and A-grade buildings. In Sydney’s CBD, all net demand over the past six months was absorbed by prime stock, while secondary grades recorded negative demand. This reflects a fundamental shift in how organisations view the workplace.
Businesses are now seeking environments that:
- Attract and retain top talent
- Support collaboration and performance
- Reinforce culture and brand
- Justify the commute back to the office
As a result, quality, location and experience are now driving leasing decisions. Once prime buildings fill, there is no equivalent substitute.
Why 2028-2031 lease expiries are high risk
Businesses with leases expiring in 2028-31 have a narrowing set of options. If they wait until the final year of their lease, they are likely to face:
- Limited availability of prime space
- A landlord-led market
- Much lower incentives
- Higher rents
- Increased fit-out and construction costs
Large anchor tenants are expected to stay put, meaning less space will become available to smaller tenants. By the time many businesses enter the market, the best buildings, and the best floors, will already be committed.
Incentives are still high but not for long
Right now, landlords are still offering unusually strong incentives. This is one of the last chances for tenants to offset fit-out costs with landlord support. In addition, construction costs are rising, meaning businesses will have to fund more of that cost themselves once incentives fall.
For many organisations, this creates a strategic opportunity to:
- Secure high-quality space earlier than planned
- Use landlord incentives to design a workplace that truly works for their people
- Lock in long-term value before the market tightens
- Avoid costly renewals in underperforming space
In some cases, we are advising clients to move early or their break lease as a deliberate strategy to capitalise on current market conditions.
What smart tenants are doing now
The businesses getting the best outcomes aren’t rushing, they’re planning ahead. This includes:
- Starting strategy and feasibility work 24–36 months ahead of lease expiry*
- Testing early relocation scenarios while the market remains strong
- Targeting high quality buildings with long-term relevance
- Treating the workplace as a strategic asset, not just a cost line
The bottom line
A new wave of high-quality office supply is entering the market, but the window to secure it is short. The best space is being taken quickly, future supply is thin, and incentives are already trending down, which will ultimately put landlords back in control.
For businesses with upcoming lease expiries, now is the time to get ahead of the market, secure superior space and shape a workplace that truly supports your people, and your future before choice and leverage disappear.
*This represents an ideal scenario. If you are closer to your lease expiry, we can advise the best options available to you.
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