National 

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

“After a challenging middle of 2024, enquiry levels from November 2024 onwards have pleasingly increased. Most recently, particularly in Sydney, activity levels and demand have been at one of the  highest levels for January in recent years. 

“Fitout costs, construction costs and interest rate levels prove to be the headwinds to discourage tenant  moves, with landlords prudently allocating capital due in the current economic environment. Where good  quality existing fitouts are available, it is financially compelling to tenants to stay put or achieve a double  deal, but only if the fitout that is existing or inherited is of a sufficient high quality and has suitability to  their business.  

“The “best and the rest” thematic continues to prevail, with a focus on high quality, well-located premises  that have the best amenity for employees, if not on the doorstep, then immediately adjacent in the  precinct. Buildings who have vacancy in these precincts within capital city markets will continue to  outperform their competition where accessibility to critical amenity, especially transport, exists. In  Sydney, the opening of the brilliant Sydney Metro has elevated this even more so.” 

Sydney 

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

“2025 is off to a positive start with circa 50,000sq m of enquires recorded for the month of January. The  trend of metro tenants looking to centralise into precincts offering better transport connectivity and  amenity continues to play out, with the CBD often top of the list in terms of choice.  

“We are now entering the end of the supply curve for the CBD with the exception of 33 Alfred Street  (approaching 100% leased) there are no new supply additions until 2027.” 

Melbourne 

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

“Prime net face rents increased by 0.2% over the last quarter after only two buildings in Melbourne’s  basket registered rental growth. Incentives remained flat for the second half of 2024 after rising 100  basis points in Q2 2024; this plateau has allowed net effective rents to return positive year-on-year  growth at 0.8%, the first time since Q1 2023.

“Demand continues to be concentrated around the better buildings and the best locations, evidenced by  several large lease deals transacting in the Eastern Core over the second half of 2024. New or high quality fitouts continue to be a priority for most tenants with lower quality spaces, even in better locations,  proving hard to lease. 

“The development pipeline in the CBD slowed in 2024 and will remain constrained in 2025, with only  two new developments forecasted to complete by the end of the year. Most of the forthcoming supply  in 2025 is refurbished stock. A recovery in net absorption could be possible later in the year as the  economy strengthens which may see the vacancy rate fall but not by much. 

“More new supply is expected to land in 2026 with Townhall, 51 Flinders Lane and 435 Bourke Street  all forecasted to complete late in the year. The effect this will have on vacancy and net absorption will  depend on how well the buildings lease before they reach completion.”  

Queensland 

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

“In 2024 we saw ongoing rental growth in the Brisbane CBD office market with vacancy improving, and  we expect a further improvement this year as leasing activity remains broad-based.  

“We expect vacancy to remain below 10% until the second half of 2025. While the quantum of net  absorption is likely to reduce in the short term, it is forecast to remain positive, and combined with no  supply – with more stock unlikely to be delivered until 2028 or 2029 - this will directly translate into further  falls in the vacancy rate. 

“We are still seeing many tenants, particularly with requirements of 1,000sq m or less, gravitating  towards existing fitouts to save on costs. However, across the board access to capital challenges from  both occupiers and owners to complete new fitouts or modify existing fitouts has contributed to higher  volumes in lease renewals, particularly in the second half of 2025.

"While several major professional  services firms in the CBD have relocated and upgraded to new accommodation, towards the end of  2024 we saw a growing trend towards tenants choosing to re-sign where they are and not undertake  the major capital works of a relocation. This is symptomatic of the wider mood with greater conservatism  and preservation of capital due to economic conditions. 

“While some tenants are staying put, major corporate occupiers with lease expiries from 2028 onwards  who want to consider new development options will need to start looking now to ensure they are able to  secure space due to limited supply coming online.

Demand for new stock within such a strongly growing  CBD is likely to remain strong but new commercial developments are facing challenges in terms of  financial feasibility due to ongoing high construction costs, extended development timeframes and  modest take-out yield expectations.” 

Perth 

According to Ian Edwards, Knight Frank Partner, Office Leasing in Perth:

"Leasing activity in the Perth CBD remains at a healthy level with new construction being taken up at  economic rents. Capital constraints (including higher interest rates and increased construction costs)  will result in a hiatus of new construction.

"This in turn will provide existing landlords some breathing  space to lease their vacancy and renew leases. Strong economic activity and population growth is  expected to underpin office demand while a lack of good quality large format vacancy in the suburbs  has seen increased CBD demand from suburban tenants. 2025 is shaping up to be a good year for  Perth office leasing."

Adelaide 

According to Rory Dyus, Knight Frank Director Office Leasing SA: 

“Positively, vacancy in Adelaide continues to decrease modestly as the market catches up with  historically high levels of new supply following the completion of three new buildings throughout 2023  and 2024. This has assisted growth in effective rents in both prime and secondary stock over the period,  mainly due to the new buildings setting new benchmarks for rent, having a positive impact on the rest  of the market; a trend we predict will continue throughout 2025. 

“As a large portion of the backfill vacancy remains in the older generation A-Grade stock, a number of  these buildings have either undergone or are undergoing major refurbishment and repositioning to  remain competitive and meet the needs of discerning tenants focused on buildings with strong amenity.” 

Canberra 

According to Nathan Dunn, ACT Head of Agency: 

“As of early 2025, Canberra's office leasing market is experiencing notable developments shaped by  new supply, federal government dynamics and broader economic factors. 

Vacancy Rates and New Supply 

“In the latter part of 2024, Canberra's prime office vacancy rate decreased from 7.4% in Q2 to 6.4% in  Q3, driven by positive demand. However, projections indicate that the vacancy rate will trend upwards  in the short term, primarily due to the completion of approximately 35,000 square meters of new office  space by Q4 2025, much of which currently lacks pre-commitments. 

Federal Government Headcount and Its Impact 

“The Federal Government remains a pivotal tenant in Canberra's office market. Recent discussions  have highlighted a significant increase of 36,000 full-time equivalent positions within the federal  bureaucracy. This expansion has been a point of contention, with debates about potential reductions  through natural attrition and the expiration of temporary contracts. Such fluctuations in government  staffing levels can directly influence office space demand, given the government's substantial  occupancy footprint in the city.  

Effect of Federal Elections on the Sector

“Federal elections can introduce uncertainties in the office leasing market. Policy shifts, administrative  changes, and potential restructuring following an election may lead to variations in office space  requirements and impact office occupancy rates in Canberra. While specific outcomes depend on  election results and subsequent policy implementations, the market often experiences a period of  adjustment during and after election cycles. 

“In summary, while the Canberra office leasing market in 2025 faces challenges from increased supply  and potential shifts in federal government occupancy, it continues to demonstrate stability. Landlords  should monitor government staffing trends and policy changes, especially in the context of federal  elections, to make informed decisions in 2025.” 

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