Australian CBD office markets show strong take up but falls short of new supply

Australia's CBD office markets recorded their strongest period of occupier demand since 2022, with national net absorption reaching 135,279 sqm over the twelve months to January 2026 signalling that businesses are once again expanding their office footprints rather than merely consolidating space. However, this impressive demand has been overwhelmed by 389,514 sqm of new CBD supply additions, pushing total vacancy to 14.8 per cent from 14.3 per cent six months earlier and leaving the market with substantial oversupply that will take years to absorb. While the return of genuine tenant activity represents meaningful progress, the reality is that at current absorption rates, vacancy will remain elevated for an extended period even as new supply finally tapers.

Queensland emerges as the standout state performer, with Brisbane CBD leading national results through exceptional annual absorption of 37,480 sqm. This marks Brisbane's continuation as Australia's most consistent office market, demonstrating sustained business expansion and tenant demand that has persisted across multiple reporting periods. The Gold Coast added further strength, while the Sunshine Coast absorbed 11,844 sqm despite its smaller market size. Combined, Queensland's results reflect strong population growth, business confidence, and corporate relocations translating into genuine office space requirements.

New South Wales markets delivered impressive absorption results across the board, led by Sydney CBD's annual take up of 21,657 sqm, premium CBD locations are successfully attracting both returning tenants and new market entrants. Parramatta recorded solid annual absorption of 4,062 sqm, demonstrating resilience in Western Sydney's key office precinct despite elevated vacancy. Newcastle emerged as a surprise performer with annual absorption of 4,836 sqm, reflecting the Hunter region's economic diversification and appeal as an affordable alternative to Sydney.

Victoria's performance centres on Melbourne CBD's return to positive territory, with annual absorption of 29,475 sqm marking a significant shift from years of negative take up. The state's non-CBD markets faced greater challenges, with St Kilda Road recording negative annual absorption of 48,711 sqm as the flight to quality continues reshaping Melbourne's office geography.

Western Australia demonstrated solid fundamentals, with Perth CBD absorbing 6,429 sqm over the past year despite elevated vacancy rates. The market's positive absorption across consecutive periods suggests Perth is successfully working through its supply cycle, with tenant demand proving more resilient than headlines about high vacancy might suggest.

South Australia's results tell a compelling story of market recovery, with Adelaide CBD absorbing 33,023 sqm annually while achieving meaningful vacancy improvement to 15.5 per cent. This represents exceptional performance relative to market size and reflects Adelaide's growing appeal to businesses seeking cost-effective, quality office accommodation outside traditional eastern seaboard markets. The Adelaide Fringe market contributed an additional 4,649 sqm of annual absorption, demonstrating strength beyond the CBD core.

Canberra maintained its position as one of Australia's most resilient office markets, recording annual absorption of 16,923 sqm despite substantial new supply additions. The capital's performance reflects the stability of government tenancies combined with growing private sector presence, particularly in technology and professional services.

The challenge lies not just in supply additions, but in the scale of vacancy requiring absorption. Over the last 12 months Sydney CBD faced 84,553 sqm of supply additions pushing vacancy to 13.8 per cent, Brisbane CBD’s 85,971 sqm of new stock driving vacancy to 11.8 per cent, and Melbourne CBD managed 100,118 sqm of completions keeping vacancy at 19.0 per cent. These supply additions represent development decisions made years ago, with projects now completing into a market where tenant demand has returned but remains insufficient to materially reduce vacancy in the near term. Even Brisbane, Australia's best performing major market, sits nearly 200 basis points above its pre-pandemic vacancy rate, highlighting the long road ahead.