_Navigating Perth’s Office Market: What Tenants Need to Know for 2026

Perth occupiers are facing an office market defined by cost pressures and supply constraints in 2026 and beyond. Tenant demand was subdued in 2025, particularly in first nine months of the year before picking up in the final few months. Early indicators and underlying structural factors suggest conditions in the market could tighten sooner and quicker than many occupiers expect in 2026. Last year, structural demand or lease expiries were lower-than-average and limited requirements for expansion space meant leasing activity in the CBD was quieter than normal in 2025.

As a result, incentives edged higher as landlords competed to retain existing, and secure new tenants in a relatively soft tenant-demand environment.

Lease renewals largely dominated leasing activity, this is evidenced by vacancy rates in the CBD falling only 0.1% to 16.9% and evident across Premium buildings. The final months of 2025 saw tenant relocation commitments emerge.

So, what does the market look like for occupiers looking in 2026 and beyond?

Office Development at a Standstill

New office supply in Perth has slowed to a near standstill. Approximately 35,000 sqm of new space was completed in 2025, well below the 10-year annual average of around
60,000 sqm. Currently, there is no office stock under construction or pre-commitments in place, this means we aren’t forecasting any meaningful new supply to come to market until 2030 at the earliest.

To trigger new development, one of two conditions must be met: either occupiers are willing to pre-commit to office space, or developers are willing to commence
construction on a speculative basis. However, at present, neither scenario appears likely. Economic rents are estimated to be around 60% higher than current average
Premium grade rents, this gap needs to narrow significantly before new development and construction becomes viable.

From an occupier perspective, pre-commitment requires accepting a higher face and effective rent, plus the substantial upfront capital expenditure for a new fit out. For
many national and global organisations, particularly those without an Australian head office in Perth, this level of upfront investment is difficult to justify, especially in an
environment where cost control remains a priority.

The realistic outcome is reduced availability of high-quality office space, particularly for larger occupiers requiring multi-floor premises or expansion capacity. We expect vacancy will start to decline in 2026, options for occupiers with upcoming lease expiries will become increasingly limited impacting negotiating leverage, commercial terms and lease flexibility.

Knight Frank forecasts average prime face rental growth of 5.4%, and effective rental growth of 6.8% between 2026 and 2029, as incentives fall and competition for high quality space increases.

Cost Consciousness Continues to Shape Occupier Behaviour

Fit out and construction costs increased sharply in the post-COVID period, raising the cost for an occupier to relocate. Combined with ongoing economic and political uncertainty, this has resulted in a more cautious approach from occupiers, particularly national and global tenants.

At lease expiry, many organisations are seeking to remain cost neutral or reduce overall occupancy costs. This has driven a strong preference for lease renewals. In 2025 when tenant demand was subdued, landlords were competitive to secure sitting tenants, however this competitiveness may change when market conditions shift.

Renewals allow occupiers to avoid paying additional costs associated with relocation and a new fit out, with incentives often structured as rent abatements to support cash flow and decrease operational costs. Unless there is a clear trigger for relocation, such as business expansion or contraction, or a material change in operational requirements, many tenants will elect to maintain their existing office arrangements.

Advice to Tenants: Early Bird Gets the Worm

In a market where future supply is constrained and cost consciousness is expected to continue, early planning is increasingly important for tenants seeking to secure office space aligned with their long-term operational and financial needs. We expect when market conditions shift, they are likely to do so quickly, leaving tenants who delay decision-making with fewer choices and weaker negotiating leverage.

Early engagement with a tenant advisor not only enables organisations to align their broader business objectives with its real estate strategy (including future workforce
requirements, evolving workplace models and flexibility) but, early engagement with a professional, may unlock opportunities outside the normal lease expiry cycle.
While lease renewals may not always feel exciting, they provide a valuable opportunity to review commercial terms and set a firm up for its future lease events.

Looking Ahead

Although leasing activity remained subdued in 2025, the structural foundations of Perth’s office market are shifting. With no meaningful development pipeline and
vacancy forecast to fall, occupiers will increasingly contend with a market where choice narrows and competition intensifies. In this environment, the decisions made well before lease expiry are likely to have the greatest impact on long-term flexibility and cost outcomes.