Sydney’s CBD office vacancy has held essentially flat, but tenants are increasingly trading up to better buildings and leaving weaker stock behind.
The latest Property Council of Australia Office Market Report shows Sydney CBD vacancy “moved from 13.7% in July 2025 to 13.8% in January 2026, with strong new supply partly offset by withdrawals and tenant demand.”
Property Council NSW executive director Anita Hugo (pictured) said the headline number hides a more complex market. Prime space is clearly outperforming, while lower‑grade buildings lag.
“Sydney’s CBD is steady, but it’s not a uniform market. Demand is concentrating in the buildings that offer the right mix of location, amenity and performance. Prime vacancy is now around 13.2%, compared with secondary vacancy around 14.9%,“ Hugo said.
The shift comes as commercial deals rebound nationally, with 2025 transactions jumping to $85.58 billion and larger, more strategic capital flows targeting quality income‑producing assets.
These trends are playing out in an environment of higher interest rates, which is lifting funding costs across the economy and adding to the pressure on secondary office assets already facing higher vacancy.
The report shows owners that continue to invest are capturing the bulk of enquiry.
“This is a market where quality is doing the heavy lifting. Owners who keep investing – in upgrades, services, and sustainability – are the ones best placed to capture demand.” Hugo said.
She said many occupiers are consolidating floorplates but upgrading the quality of their space.
“Many tenants are using less space, but they want it to work harder, and that means better on-site facilities, more flexible fit-outs, and buildings that can demonstrate strong energy and environmental performance,” Hugo said.
Sydney’s non‑CBD markets “remain under pressure, with several Sydney metropolitan precincts among the highest vacancy rates nationally,” Hugo said. “Some metro precincts are still dealing with growing vacancy rates, and the direction of travel is clear – businesses are consolidating and prioritising offices that help them attract staff and run better workplaces,” she said.
Looking ahead, major Sydney CBD projects on the horizon include 8–10 Lee Street (58,000sqm) in Q4 2026, 37–55 Pitt Street (63,000sqm) in Q3 2027, and 2 Chifley Square (53,275sqm) in Q3 2027.
Hugo said more than half of this future CBD stock is already spoken for.
“The pre-commitment story matters - it shows demand is there, particularly for well-located, high-performance stock. The challenge is to keep the pipeline investable and keep Sydney competitive as a destination for business,” the Property Council leader said.
For brokers, the combination of steady headline vacancy, flight‑to‑quality, softer metro markets, and largely pre‑committed prime supply is likely to remain a key talking point with lenders and commercial clients through 2026 and beyond.
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