Knight Frank office market commentary for release of PCA vacancy rate figures

31 January 2024

According to Andrea Roberts, Knight Frank National Head of Leasing:

“The bifurcation story continues in Australia’s office leasing market. Generally, in all markets prime stock continues to see positive net absorption, with vacancy remaining sticky or increasing in assets that can’t meet the high standards of tenants’ accommodation criteria in a post-COVID world. Occupiers will pay for amenity and quality fitouts delivered as turnkey solutions. We are seeing good demand across the country with Brisbane, Perth and Sydney CBD core particularly strong.

“In 2024 we expect that as new prime core developments complete with high levels of pre-commitment, this will underpin rental growth and generally put pressure on incentive levels to decrease.

“With new Federal Government guidelines coming into play which increase energy efficiency targets through a minimum 5.5 Star NABERS Energy ratings for existing buildings, demand for new buildings will continue to be strong versus development pipelines that have faced headwinds of rising construction costs and interest rate hikes.”


According to Al Dunlop, Knight Frank Head of Office Leasing, New South Wales:

“Sydney CBD’s leasing market ended on a positive note in 2023 with record enquiry levels and an increase of 15% year on year. The majority of the enquiry was in the smaller occupier market, with 75% of such being sub-1,000sqm. The fourth quarter saw an increase in occupier commitments at the larger end of the market with several 5,000sqm-plus transactions being documented.

“Supply will continue to get stripped out of the market as some larger schemes struggle for pre- commitments, which is paving the way for a tighter CBD market. We anticipate 2024 to provide another year of robust rental growth albeit with elevated incentives.”


According to Hamish Sutherland, Knight Frank Head of Office Leasing, Victoria:

“Vacancy rates in Melbourne’s office market remain relatively high and as a result tenants are taking advantage of the weaker leasing conditions by securing good quality fitted space and a market incentive on top.

“A few large leasing deals are anticipated to be executed over the next couple of months.

“New development remains constrained.”


According to Mark McCann, Knight Frank Head of Office Leasing, Queensland

“The Brisbane office market has continued to perform strongly over 2023 with increased deal volumes primarily in the Prime grade sector. There was a genuine increase in tenant demand across multiple industry groups in addition to major new demand from the State and Commonwealth governments.

“With new construction costs continuing to be a barrier for new development, we expect the longer-term trend of vacancy reduction to continue over the next 24 months, leading to further growth in face and effective rents.”


According to Rick McKenzie, Knight Frank Head of Office Leasing, WA:

“The Perth CBD office market performed well in 2023 with a high proportion of transactions being concluded within Prime Grade stock. Rents continue to increase at moderate levels, driven by the demand for quality fitted space and supported by the rising cost of construction.

“Premium stock remains in high demand, supporting the national trend of tenants placing a growing importance on the quality of accommodation, precinct amenity and ESG initiatives.

“Limited completions in 2024 will accelerate rental growth.”


According to Nathan Dunn, ACT Head of Agency:

“Canberra typically has one of the lowest vacancy rates in the country, with demand from government tenants remaining steady and underpinning the market.

“As with any market, there are factors that may impact on vacancy in the future, including working from home; the impact of which may not be felt until later, perhaps in 2025 or 2026.

“Core town centres and sub-markets like the CBD, Parliamentary Triangle and the Airport precinct are seeing the highest demand, with location being one of the key considerations for tenants.”