This is a structural shift rather than a cyclical blip. Since January 2020, Australia’s office market has grown by 2.3 million sqm, yet occupied stock has risen by just 8,568 sqm to 23.1 million sqm. By comparison, occupiers took up around 2.25 million sqm in the decade before the pandemic. Businesses are bringing staff back for part of the week while using desk sharing, hybrid rosters and lease expiries to hold or reduce their footprint. Canberra is the clearest example, where government tenants have consolidated into more efficient space despite the territory recording one of the lowest unemployment rates in the country.
The US findings suggest this gap could widen further. If a mandated office day still delivers a day of video calls, occupiers have little reason to take more space. Demand instead concentrates in buildings that make being together worthwhile through quality meeting and collaboration space, amenity and transport access. This brings back the “pivot to premium” argument leaving secondary stock facing the toughest test.
The economic backdrop is also shifting. The latest ABS Labour Force data shows the unemployment rate rose to 4.7 per cent in September 2026, with employment falling by 39,300 people over the month and the number of unemployed Australians up 55,200, or 8.2 per cent, over the year. NSW recorded a 0.4 percentage point jump to 4.7 per cent, while Victoria remains the highest of the states at 5.1 per cent. At the same time, the Reserve Bank lifted the cash rate to 4.60 per cent on 29 September, its fourth increase this year and the highest level since 2011.
This combination has a dual impact for the office market. A looser jobs market shifts bargaining power back to employers and staff concerned about job security are more likely to comply with attendance policies and be visible in the office. Yet higher borrowing costs and slower hiring encourage occupiers to contain costs, defer expansion and use either relocation or lease renewals to shrink, particularly as affordability comes into play. The risk is that attendance rises for the wrong reason. Workers turning up to be seen rather than to collaborate does little to lift demand for space.
The measure of office recovery needs to move beyond how many days staff attend to whether time in the office is productive enough to justify the space businesses pay for. Mandates and job insecurity may fill desks in the short term, but they will not lift take-up if the office simply becomes a more expensive place to sit on video calls. For landlords, this places a premium on buildings that support genuine collaboration, while for occupiers the opportunity lies in coordinating attendance around teams rather than headcount, which may mean less space overall, but better space. With new supply tapering, prime stock in Brisbane and Perth is already tightening and the divide between assets that bring people together and those that simply house them is likely to widen from here.