Australia’s CBD office markets are showing firmer signs of stabilising, with improving vacancy figures, renewed interest from offshore capital and development economics that make new construction increasingly difficult.
Together, these factors are shaping expectations that 2026 will mark a turning point for the sector.
Ray White Group Head of Research, Vanessa Rader, says sentiment has shifted from uncertainty to a clearer view that improvement is on the horizon for prime CBD assets.
Offshore and institutional buyers are again active, but more selective than in past cycles, and their focus is on assets with long-term resilience rather than quick gains.
Early performance indicators back this shift, with MSCI data showing Sydney CBD premium stock posting 1.8 per cent capital growth and total returns of 6.9 per cent.
Brisbane’s premium sector is also closing the gap, recording only a 0.6 per cent capital slip and 5.4 per cent in total returns over the same period.
Across the country, premium CBD offices have narrowed capital decline to just 0.3 per cent.
Vacancy trends are adding weight to the outlook. Sydney recorded its strongest net absorption since 2016, while Brisbane continues to stand out as one of the most consistent markets, keeping vacancy near 10.7 per cent.
Adelaide has also posted solid improvement, suggesting that disciplined supply conditions are helping even the smaller CBDs tighten.
Ms Rader report that the supply story has become a defining factor as construction costs have risen to the point where the rents needed to justify new development no longer stack up.
Material prices, labour shortages and scarce builder availability have pushed the economics beyond feasible levels.
More than 1.7 million square metres of proposed CBD office projects are currently on hold, leaving only selective refurbishments progressing. This freeze is shifting power back to existing stock.
With demand gradually improving and new supply unable to keep pace, upward pressure on rents is building for quality buildings.
Perth is the clearest example of this imbalance, with the gap between current face rents and the level needed to trigger new construction widening sharply.
Assets with strong ESG performance, high-grade amenities and central locations are attracting attention, with the gap between prime and secondary buildings continuing to grow as occupiers prioritise quality and workplace appeal.
Geography is shaping the story too as Queensland continues to record solid results, with Brisbane CBD and fringe markets maintaining tight conditions and consistent absorption.
Sydney’s premium sector remains the most advanced in its recovery path, while Adelaide has shown that smaller CBDs can achieve meaningful improvement when supply is kept in check and business conditions support leasing activity.
Looking to 2026, the alignment of firmer demand, limited pipeline and rising institutional interest points to a recovery phase for prime CBD office assets.
Buildings with strong sustainability features, modern specifications and locations that help attract and retain staff are positioned to benefit the most.
Secondary assets are likely to face continued pressure, including potential repositioning or alternate use.
For premium stock, however, the shift from adjustment to improvement is now underway, and investors are preparing accordingly.
