Sydney's Office Recovery Is Prime, and Only Prime

Two of Australia's largest property research firms publish different Sydney CBD vacancy rates for the same city in the same period, and both are quoted as "the" number. JLL reported 13.9 per cent for the June quarter, its lowest since the first quarter of 2023. CBRE's figures put CBD vacancy at 13.3 per cent as at July. ANZ's third-quarter paper used 13.9 per cent.

Neither is wrong, and the difference is methodology and date. But the more useful finding sits underneath all three: the recovery is entirely a prime recovery, and the sublease market moved sharply the other way in the very quarter the headline improved.

Prime did all the work

ANZ's Commercial Property Insights Paper for the third quarter states that Sydney had the greatest absorption of office space across the capitals over the past three years, taking up a net 180,000 square metres, with overall vacancy improving from a high of 15.6 per cent to 13.9 per cent. The same document then notes that "the entirety of this absorption has occurred in the Prime segment, while a total of 80,000 sqm of Secondary flooring has been vacated since 2023."

CBRE corroborates the split. Its first-half figures show prime net absorption of 19,388 square metres against secondary at negative 1,107 square metres. JLL reports gross effective rents of $1,135 per square metre per annum, up 8.3 per cent year on year, and a supply pipeline of 175,600 square metres across four projects, or 3.3 per of stock, with no new supply delivered in the first two quarters of 2026.

JLL's own framing notes the recovery has migrated outwards from the Core: "The Sydney CBD office market resilience story has migrated from the Core precinct to Midtown and the Western Corridor," attributed to head of research Australasia Andrew Ballantyne.

Subleases spiked in the same quarter

CBRE's Sublease Barometer for June 2026 recorded national CBD sublease availability at 151,653 square metres, up 21.6 per cent on the quarter, ending nine consecutive quarters of decline. Sydney was the largest single movement, with sublease space up 18,241 square metres or 44.5 per cent to 59,203 square metres, over half of it from one block in the Southern precinct.

Rising sublease availability is a forward indicator of negative absorption. It is difficult to reconcile a 44.5 per cent quarterly jump in Sydney sublease space with a narrative of falling headline vacancy and a fifth consecutive quarter of positive net absorption. Both numbers describe the same quarter.

Average listing size fell 9.4 per cent to 1,076 square metres, and Sydney's sublease stock remains modest at 1.1 per cent of total stock against Melbourne's 1.3 per cent.

Investment recovered on domestic money

CBRE's capital flows report for the first half of 2026 put total Australian sales at $19.0 billion, up 16 per cent year on year, with office at $4.2 billion, up 15 per cent and "mostly driven by transactions in Sydney." Direct offshore investment fell 8 per cent, leaving offshore buyers at $4.0 billion, or 21 per cent of volume. Knight Frank found domestic capital supplied 43 per cent of 2025 volume, against more than 75 per cent offshore in 2022.

Savills published a materially cooler valuation picture in May 2026, with Sydney CBD capital values up 2.2 per cent year on year and Premium values still 17 per cent below their 2022 peak.

What to watch

Office research houses publish quarterly, and third-quarter reports from JLL, CBRE and ANZ were due in early to mid-October. No government source publishes office vacancy, net absorption or investment volume, so every figure above is a proprietary survey with its own methodology and sample. Quarter three will show whether the sublease spike becomes vacancy or gets absorbed.

Sector commentary is with JLL, CBRE and ANZ. Our Property desk tracks the market.