The office market is shifting

After two consecutive years of elevated vacancy rates and subdued leasing activity, the office market is showing clear signs of recovery. Q1 2026 data confirms what we have been seeing on the ground — businesses are committing to space again, and CBD locations are leading the charge.

This report covers the key trends shaping the office market across the metro region and what they mean for both tenants looking for space and landlords managing existing assets.

Vacancy rates are tightening

The headline number from Q1 2026 is a drop in CBD office vacancy from 18.2% to 14.1% — the sharpest single-quarter decline since 2019. This is not a statistical anomaly. It reflects a genuine wave of leasing activity from businesses that deferred expansion decisions during the uncertainty of 2023 and 2024.

Suburban office markets are also seeing improvement, but at a slower pace. Vacancy in suburban precincts sits at 21.4%, down from 23.1% in Q4 2025. The flight to quality continues — tenants are gravitating toward well-located, well-amenitised buildings over cheaper suburban alternatives.

Rents are rising — But carefully

Average asking rents for prime CBD office space increased by $2.10/sqft in Q1, bringing the metro average to $34.50/sqft NNN for Class A space. This represents the first meaningful rent increase in 18 months and signals that landlords are beginning to regain negotiating power.

However, face rents do not tell the full story. Effective rents — which account for incentives like rent-free periods and fitout contributions — remain lower than pre-pandemic levels. Landlords are increasing asking prices while still offering incentives to close deals. This dynamic is expected to normalise over the next 12–18 months as vacancy continues to tighten.

What renants should do right now

For businesses currently in the market for office space, Q1 2026 represents a transitional window. The balance of power is shifting from tenant-favorable to more neutral conditions. Tenants who move decisively in the next two quarters will secure better terms than those who wait.

Key negotiating points to focus on now include lease term flexibility, rent review mechanisms, and fitout contributions. These are areas where landlords are still willing to negotiate — for now.

What landlords should know

For building owners, the improving market provides an opportunity to reassess leasing strategy. Properties that were sitting with incentive-heavy mandates should consider reducing incentive packages and testing the market at firmer rental levels.

Buildings with upcoming lease expiries should begin renewal discussions early. Tenants who are happy with their current space are more likely to renew than risk competing for scarce CBD supply in a tightening market.

Looking ahead to Q2 2026

Forward indicators suggest the positive momentum will continue into Q2. Active tenant enquiries are up 28% year on year across our brokerage, with the strongest demand coming from professional services, technology, and financial services firms.

We expect CBD vacancy to fall below 12% by the end of 2026 — a level that will meaningfully constrain tenant options and put further upward pressure on rents. For tenants with space requirements coming up in the next 12 months, the time to start looking is now.