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Office vacancy rates have edged up as tenants pursue higher-quality work spaces, according to new research.
CBD office vacancy rates have risen to 14.3 per cent in H1 2025, up from 13.7 per cent at the start of the year, the Property Council has revealed.
Over 200,000 square metres of premium office space entered the market throughout the same period, outpacing demand and contributing to the rise in vacancies.
While tenants flocked to premium office spaces with a 2.7 per cent increase in demand, lower-tier office stock recorded declines as occupied spaces fell across B-, C- and D-grade buildings.
The council expects the trend to continue, with 131,697 square metres of new space set to launch in the next six months.
Property Council chief executive Mike Zorbas said tenants were targeting better quality buildings.
“The continuous supply of new high-quality office space in our CBDs is a response to businesses searching out great places for their employees to work in,” he said.
“Tenants are capitalising on opportunities to occupy premium buildings in prime CBD locations, with premium space continuing to see higher demand levels than lower-grade buildings.
“We have seen a year-and-a-half of positive demand for office space, with more businesses taking up office space than leaving behind.
“Much of this demand is centred on premium and A-grade buildings, with B-, C- and D-grade office buildings experiencing negative demand over the last six months.”
Despite rising vacancy rates, sublease stock has declined, tightening supply of leftover commercial space.
Sublease levels are now at their lowest point in nearly five years, having peaked during the pandemic.
“Pleasingly, we have seen a notable decline in the sublease space over the last two years, with every city recording sublease vacancies below their historical average,” Zorbas continued.
“Sublease space in our CBDs is at its lowest point in nearly five years after rising during the pandemic.”
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