Sydney CBD office vacancy falls as prime demand strengthens
Sydney CBD office vacancy declined in the third quarter of 2026 as tenants continued to favour premium and well-located buildings, while investment activity strengthened after a slower start to the year.
Cushman & Wakefield reported that overall vacancy fell by 50 basis points to 13.3%, while Premium Grade vacancy dropped by 120 basis points to 7.7%. Six-month net absorption totalled 18,715 square metres, including 19,388 square metres within Premium Grade stock.
The figures highlight a widening performance gap between higher-quality CBD offices and older secondary stock, with leasing activity particularly concentrated in Premium Grade buildings and higher floors offering stronger workplace amenity and views.
Premium assets lead leasing performance
Prime office rents continued to rise through Q3, while incentives remained broadly stable across higher-grade assets.
The market statistics table shows average net face rents of $1,626 per square metre per annum for Premium Grade space, $1,374 for A-grade offices and $1,039 for secondary assets. Average gross incentives were 35.4% for Premium Grade, 36.7% for A-grade and 38.9% for secondary stock.
Cushman & Wakefield also reported particularly tight availability for Premium and A-grade high-rise offices within the CBD Core, while secondary accommodation continued to face more difficult leasing conditions.
New projects could keep vacancy elevated
Sydney’s development pipeline remains concentrated in several large prime projects.
Atlassian Central, comprising 58,000 square metres, is expected to complete early next year. The report also identifies 37-55 Pitt Street at 60,000 square metres and Chifley South at 53,275 square metres as projects expected to complete during the second half of 2027.
Chifley South was approximately 70% pre-committed at the time of reporting. Cushman & Wakefield said the volume of new space expected through 2027 could keep overall vacancy elevated while the market absorbs these projects.
Beyond 2027, proposed supply becomes less certain, with potential projects including over-station developments above the future Hunter Street Metro precinct. Timing will depend on factors including pre-commitments, funding conditions and development feasibility.
Investment activity strengthens
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Capital markets activity increased during Q3, with several large Sydney CBD transactions recorded.
Investa acquired 1 Market Street for $485 million, while 100 Market Street sold to Link REIT and Aware Super for $258 million. Centuria also acquired a 50% interest in 680 George Street for $454 million.
The report said domestic capital continued to dominate buyer activity, while investor interest remained concentrated on prime assets with strong income characteristics and longer-term value-add potential.
Yields were comparatively stable. Premium yields held at 5.77%, while A-grade yields softened by three basis points to 6.45% and B-grade yields moved four basis points higher to 7.15%. Cushman & Wakefield said the divergence continued to favour higher-quality, well-leased assets.
SOURCE ATTRIBUTION:
Based on reporting by Cushman & Wakefield in MarketBeat: Sydney CBD Office Q3 2026.
