_Australia’s larger CBDs recording robust office rental growth

Net effective rents in the Sydney and Melbourne CBDs recorded their fastest growth post the pandemic, with increases of 10.2% and 6.8% respectively over the 12 months to the end of March.

The Brisbane CBD saw the largest growth over the same period, posting 11.7% annual net effective rental growth.

A separate Knight Frank report – Asia-Pacific Q1 2026 Office Highlights - also found strong rises in prime office rents in Australia and India are leading the recovery in the APAC office market, with prime net face rents across APAC rising by 0.8% in Q1.

It found annual prime net face rent growth in Sydney (8.6%) and Brisbane (8.2%) were among the strongest rates within APAC, beaten only by Bengaluru and Tokyo.

The report shows APAC’s prime office markets sustained their recovery momentum in the first quarter of 2026, even as the escalation of the conflict in the Middle East introduced geopolitical uncertainty. 18 of 24 monitored cities reported stale or increasing rents quarter-on-quarter, up from 17 in Q4 2025.

Knight Frank Senior Economist, Research & Consulting Alistair Read said the robust growth in net effective rents over Australia’s major CBD office markets was driven by acute demand for premium, well-located office assets and a tightly constrained supply pipeline.

“Occupier demand continues to be heavily concentrated in the most desirable CBD precincts and the highest-quality buildings, accelerating a sharp divergence between core and non-core markets,” he said

“In Sydney’s Core precinct and Melbourne’s Eastern Core, net effective rents surged 14.3% and 16.1% over the past year, significantly outperforming the rest-of-CBD precincts.

“As a result, core CBD rents are now 54% higher than non-core locations in Sydney and 93% higher in Melbourne, highlighting the growing premium placed on amenity, accessibility and workplace quality.

“Rental growth in suburban markets remains subdued, with tenant demand largely skewed to the CBDs. Of the suburban markets, Southbank in Melbourne has performed relatively well, with annual net effective rental growth of 2.7%.”

Mr Read added: “The combination of sustained demand and declining levels of new development will aid ongoing prime rental growth and lower vacancy rates over the medium term, particularly for best-in-class assets.

“The conflict in the Middle East has increased uncertainty for investors and presents immediate headwinds given the outlook for higher interest rates throughout 2026.

“However, over the medium-term, the fundamentals of a supply constrained environment persist, and the longer-term trajectory for interest rates points lower around late 2027 to 2028.

“Economic rents remain well above expected market rents, making the construction of new office towers largely unviable, and concentrating tenant demand into existing buildings.”

See full report here