Office space across Australia's cities is in higher demand than six months ago, as governments and businesses seek to move into new digs at the expense of older buildings.
Fresh data from Property Council of Australia showed vacancy rates across the country were at 14.9 per cent in July, compared with 14.8 per cent in January.
The slight increase was led by Adelaide and Canberra, while all other capital cities had a decrease in vacancy.
In Brisbane, almost 39,000 square metres were absorbed from the market, followed by 27,500 in Perth, signalling strong demand and limited construction.
Clients nation-wide were increasingly moving to high-grade stock, even if it meant paying more up front, according to the council.
The shift was particularly pronounced in Canberra, where federal government clients sought to move into premium and A-grade buildings following a 2025 mandate to lease energy-efficient builds.
There, the vacancy rate was at 14.7 per cent, up from 10.4 per cent in January, following an influx of new stock to the market while older buildings remained unoccupied.
Cities Australia-wide continued to grapple refurbishing or repurposing older office buildings despite growing costs.
In 2024 and 2025, turning old buildings into medium-density housing was a serious consideration for many office owners, but Property Council group executive Matthew Kandelaars said rising construction costs had made such technical undertaking "prohibitively expensive".
“The real challenge is cost. It's a very significant cost to get a building up to scratch for residential codes, lift placements, and flow," he said.
For others, bringing aging stock in line with updated standards was a worthwhile endeavour.
“There really is a strong and quite pronounced flight to quality. You’re seeing far stronger demand and far lower vacancy rates in premium grade buildings," Mr Kandelaars said.
“That encourages the owners of lower grade stock to refurbish or put capital towards improvement."
