Acure Asset Management provides in-house research, analysis and news bulletins to subscribers on a monthly basis.
Our reports are based on Australian Property and Market trends as they happen – as well as reflective reports on our portfolio and performance.
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Australia’s office market is entering a pivotal phase, with Q3 2025 marking a clear shift in momentum across leasing, investment, and rental conditions. National prime effective rents have now exceeded pre-pandemic peaks, vacancy is stabilising, and forward supply is set to hit its lowest levels in decades, positioning the sector for meaningful tightening from 2026 onward. While decision-making remains measured, enquiry from major corporates is strengthening, and early signs of yield compression are emerging in key CBDs. This newsletter summarises the latest national trends and provides a focused lens on the Australian office market to support informed investment decisions.
Market Fundamentals Strengthen as Rents Surpass Pre-COVID Peaks
Effective Rents Hit New Highs
National CBD prime net effective rent: $624/sqm, up 2.3% QoQ and 4.8% YoY – officially surpassing the previous 2019 peak
Momentum is being driven almost entirely by face rents, up 4.8% YoY, while incentives remain elevated.
Incentives Remain Stubbornly High
National prime incentives: 39.8%, with slow downward movement due to:
Persistent fit-out cost inflation
Tenant preference for “turnkey” or plug-and-play space
Market Standouts
Sydney CBD: strongest national rental growth (4.2% QoQ) and the only CBD with declining incentives (from 38.9% → 37.5%)
Brisbane CBD: +2.9% QoQ and +9.5% YoY effective rent growth – underpinned by strong demand in large occupiers.
Melbourne: modest improvement; strength concentrated in Eastern Core/Civic precincts (+8.4% YoY, +6.1% YoY)
Adelaide & Perth: both recording ~4–4.6% YoY rental growth.
Demand, Vacancy & Tenant Behaviour
Decision-making remains slow but improving
H1 2025 national net absorption: 63,738 sqm, signalling a broad-based improvement in enquiry, especially among corporates with >2,000 sqm requirements
Sub-1,000 sqm market remains subdued, with high relocation costs pushing SMEs toward renewals.
Top Demand Performers
Adelaide CBD: standout with 22,326 sqm net absorption (1.4% of stock) in H1, supported by defence-led demand
Brisbane CBD: continues to show positive absorption despite slow deal execution.
Sydney CBD Premium: high activity early 2025, with recovery spreading outside the Core.
Vacancy Ticks Higher to 14.3%
National CBD vacancy increased from 13.7% → 14.3% in H1 2025.
Markets with falling vacancy:
Adelaide: 16.4% → 15.0%
Melbourne: 18.0% → 17.9%
Markets with rising vacancy:
Perth, Brisbane, Sydney (mainly due to new supply & increased sublease availability)
Record-Low Supply Pipeline to Support Vacancy Compression
Historical Supply Crunch Coming
Forecast office stock growth: 0.5% p.a. (2026–2030) — lowest since late 1990s
Developer sentiment hindered by:
Elevated construction costs
Softened asset valuations
Institutional capital reducing office allocations
Implication:
Low supply should drive material vacancy reduction from 2026 onward, following historical patterns (vacancy fell from 14.4% → 6.4% during the last low-supply cycle in the late ’90s).
Capital Markets: Early Signs of Re-Pricing & Renewed Liquidity
Transaction Volumes Rebound
Q3 2025 national office transactions: $2.1bn, up 42% QoQ, though still 20% below 2024 YTD
Large Q4 pipeline expected in:
Sydney
Brisbane
Melbourne Leads Transaction Activity
Three major CBD deals totalling $840m in Q3:
750 Collins Street – $390m
Flinders Gate – $255m
357 Collins Street – $195m
Yield Shift: First National Tightening Since 2022
Prime CBD yields tightened 3 bps → 6.68%
Sydney CBD: strongest compression (12 bps)
Perth & Canberra: slight softening (+8 bps, +6 bps) due to lower transactional evidence.
Market-by-Market Rental Growth (YoY)
Brisbane: strongest YoY net effective rent growth nationally
Sydney: strong growth in both NER & face rents
Adelaide: outperforming broader market
Perth: moderate steady improvement
Melbourne: lagging but stabilising
