Office Vacancies Decline in most Capitals

5 August 2021

Australia’s capital city office markets have shown remarkable resilience in the face of the impacts of COVID-19 over the first half of 2021, with the key exception being the Melbourne CBD where demand for office space fell by the largest level on record.

The Property Council of Australia’s latest Office Market Report has also highlighted the resilience shown by the Sydney CBD office market during the most pressing times in recent history. Despite the health restrictions of the past 18 months, the vacancy rate remains below 10 percent for Sydney CBD. Sydney remains as one of the most well-equipped markets to mitigate new challenges faced by the commercial office market, as one of two mainland CBD markets across the country that records vacancy below 10 percent.

Australia’s aggregate vacancy rate for all office markets increased only slightly from 11.6 to 11.9 per cent for the six month period to July 2021, according to the Property Council of Australia’s Office Market Report. The report measures the levels of leased space, not worker occupancy of office space.

Overall CBD vacancy edged higher from 11.1 per cent to 11.2 per cent. While non-CBD markets also recorded a small vacancy increase, from 13.0 per cent to 13.6 per cent.

Property Council Chief Executive Ken Morrison said that the numbers reflect pleasingly solid demand for office amid the disruptions of the pandemic.

“Australia’s office markets have shown remarkable resilience over the past six months, with overall aggregate vacancy levels only increasing slightly,” Mr Morrison said.

“Excluding Melbourne, demand for CBD office space grew by 85,000 sqm over the six months, a result that few would have predicted given the impacts of the pandemic.

“In contrast, demand for space in the Melbourne CBD dropped by more than twice as much as its previous largest six-monthly fall on record.

“As a result vacancy in Melbourne CBD increased to 10.4 per cent, which also has some 220,000 sqm of new supply coming online over the next six months.

“While Sydney was the only other CBD market to experience an increase in vacancy, this was the result of a significant amount of new office space coming online – demand actually grew by 27,000 sqm.

“Vacancy in other capital cities all declined: Brisbane to 13.5 per cent, Perth to 16.8 per cent, Adelaide to 15.7 per cent and Canberra to 7.7 per cent.

“Vacancy results in non-CBD markets showed a broader spread, with half increasing and half declining. In aggregate, demand for office space in non-CBD markets was flat.”

Mr Morrison said office markets still faced considerable uncertainty.

“While office markets have shown pleasing resilience, challenges remain. Lockdowns continue and the impacts of the pandemic are still working through the economy, so CBD recovery needs to be a priority for governments at all levels.

“It is a CBD’s commercial strength that underpins its role as premier cultural, dining, entertainment, retail and tourism precincts for the broader population. It’s a future we all have a stake in,” Mr Morrison said.

Office vacancies are calculated on whether a lease is in place for office space, not whether a tenant’s employees are occupying the space or working from home.


  • Vacancy Rate 9.2%, up 0.6% from 8.5%
    • Additions to Office Supply added +1.9% to vacancy factor
    • Withdrawals of Office Space reduced -0.7% to vacancy factor
    • Tenant Demand reduced -0.5% to vacancy factor
  • 2021 Projected Supply 34,600sqm –
    • Q3 570 George Street 18,100sqm
  • 2022 Project Supply 165,740sqm
    • 255 George Street 19,000sqm
    • 50 Bridge Street – 75,033sqm
    • 180 George Street – 55,207sqm
  • 2024 Projected Supply
    • 33 Alfred Street – 31,000sqm

Comments from Savills

According to Tom Mott, State Director – Office Leasing – NSW at Savills Australia, the Sydney CBD began to see a resurgence in activity and broad leasing demand. “Pre this current lockdown, the city streets were as busy as they had been since February 2020. The SME cohort really drove this as they looked to bring their staff back together to drive culture and productivity.

“Many tenants sought the opportunity to upgrade their office space given the vacancy rate shifted well beyond the landlord/tenant equilibrium point. This resulted in a flurry of leasing activity. The 5,000sqm plus market was less active as those groups were still grappling with head count as a result of touted hybrid working models.

“We see our clients continue to invest in their buildings knowing that once again there will be a surge in leasing demand post the current Sydney lockdown”.


  • Vacancy Rate 10.4%, up 2.0% from 8.4%
    • Additions to Office Supply added +0.3% to vacancy factor
    • Withdrawals of Office Space added -0.3% to vacancy factor
    • Tenant Demand added 2.0% to the vacancy factor
  • 2021 Projected Supply 220,074sqm –
    • Q3 –405 Bourke Street –66,000 sqm
    • Q3 –1000 La Trobe Street –33,000 sqm
    • Q3 –100 Queen Street –30,353 sqm
    • Q4 –750 Collins Street –38,933 sqm
  • 2022 Project Supply 102,478sqm
    • Q3 –637 Flinders Street –25,716 sqm
  • 2023+ Projected Supply 128,000sqm

Comments from Savills

Mark Rasmussen, State Director – VIC Office Leasing at Savills Australia said despite lockdowns and the current 25 % occupancy cap for office users, inquiry levels remain steady.

“Various market sectors are responding to the changed conditions to suit their business. A significant proportion of the market are catering for work from home models however others including IT and some professional services are expanding their office requirements.

Demand is strong for fitted tenancies and well-presented accommodation. Tenants are taking advantage of the current conditions and upgrading to higher office grades to attract the best and brightest staff. We expect inquiry levels to improve to cater for pent up demand after lockdown”.


  • Vacancy Rate 13.5%, down 0.1% from 13.6%
    • Additions to Office Supply added +0.0% to vacancy factor
    • Withdrawals of Office Space added -0.0% to vacancy factor
    • Tenant Demand reduced -0.1% to the vacancy factor
  • 2021 Projected Supply 44,000sqm-
    • Q3 –155 Charlotte Street (Mid Town Centre) –44,000 sqm
  • 2022 Project Supply 58,449sqm
    • 2022 Q1 –80 Ann Street –58,449 sqm
  • 2023+ Projected Supply
  • Mooted 467,920sqm

Comments from Savills

According to David Howson, State Director- QLD at Savills Australia, The Brisbane CBD has seen notable activity within the sub 500sqm market with a significant increase in enquiry and general activity in this space.

“A Grade continues to be the most active sector with continued take-up of quality fitted tenancies.

Challenges still remain in the larger end of the market with WFH remaining a hot topic, we are expecting some strong announcements within this part of the market over the coming months and the 2032 Olympics should add a good spring to the step of the market – subject to vaccination success and post the current lockdown pandemic”.


  • Vacancy Rate 16.8%, down 1.1% from 19.9%
    • Additions to Office Supply added +0.3% to vacancy factor
    • Withdrawals of Office Space added -2.5% to vacancy factor
    • Tenant Demand reduced -0.9% to the vacancy factor
  • 2021 Projected Supply 54,776sqm-
    • Q3 –98 Mounts Bay Road (Capital Square) –25,200 sqm
    • Q3 –168-170 St Georges Terrace (The Atrium) –12,500 sqm
  • 2022 Project Supply 40,252sqm
    • Q1 –905 Hay Street (Dynons Plaza) –13,200 sqm
  • 2023+ Projected Supply 52,000sqm
  • Mooted 86,000sqm

Comments from Savills

David Evans, Director – Office Leasing – WA at Savills Australia said over the last 6 months The Perth CBD has continued it transactional spirit buoyed by strong business confidence despite a minor setback with the short lockdown during the recent school holidays.

“Some owners have started to increase face rents in certain Prime stock where vacancy is tightening however generally effective rents are offset with incentives. Competition between owners seeking to attract new tenants “v” owners seeking to retain existing tenants provides occupiers favourable terms whether relocating to a higher grade of accommodation or upgrading their existing space.

“Brokerage deals sub 500sqm has again remained steady and is lease expiry lead. Active small to medium size occupiers are concentrating on new speculative fit outs, available in all grades, from 100sqm to full floors of over 1,000sqm.

“Larger active occupiers continue to prefer bespoke fit outs with modern, flexible workplace environments and superior amenity.

“Buildings with large existing or pending vacancies are undertaking refurbishment or upgrades to attract suitable occupiers. Developers are actively seeking pre-commitments to kick off one or two high profile sites”.

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