Office rents in Sydney’s CBD core hit record highs as occupier demand tightens premium vacancy: Knight Frank research

Sydney, Australia – Strengthening occupier demand in Sydney CBD's Core has driven net effective rents in this precinct to record highs, with premium vacancy continuing to tighten amid a constrained supply pipeline, according to Knight Frank's Sydney CBD Office Market H2 2026 report.

The report found premium-grade vacancy has declined to 7.7%, down from 10.8% two years ago, reflecting sustained demand for high-quality office space in amenity-rich core locations.  

At the same time, prime net effective rents recorded double-digit annual growth of 12.2%, led by the Core, with 14.8% growth over the past year, followed closely by Barangaroo at 14.2% and Western at 9.1%.

This growth has lifted net effective rents in the Core to their highest level on record, now 4% higher than pre-pandemic levels.

Occupier demand continues to strengthen, with 30,074 sqm of net absorption recorded over the past 12 months, marking the second consecutive year of positive absorption. More than 480,000sq m of active tenant requirements were also tracked during the year, providing a strong foundation for further leasing activity.

Knight Frank Director, Research & Consulting NSW Marco Mascitelli said Sydney CBD's office market had reached an important turning point, with a sustained and structural uplift in occupier demand now translating into materially stronger rental growth.

"The most significant story in the Sydney CBD market is the acceleration in rental growth being driven by a strengthening occupier market, particularly across premium assets in the Core precinct as occupiers prioritise workplace quality, employee experience, transport connectivity and integrated amenity,” he said.

"Premium vacancy has tightened to 7.7%, while net effective rents in the Core have surged by 14.8% over the past year to reach their highest level on record. This reflects the continued flight to quality, with occupiers increasingly focused on securing the best buildings in the most connected locations.

"We are also seeing demand broaden and deepen, with more than 480,000sq m of active tenant requirements tracked over the past 12 months.  

“Positive absorption for a second consecutive year points to growing occupier confidence and a strengthening leasing environment."

The report highlights the significant divergence between premium and secondary stock. Premiumgrade space recorded 76,500sq m of positive net absorption over the past year, while secondary stock recorded negative absorption of 46,426sq m, underscoring occupiers' preference for best-in-class office accommodation.

Looking ahead, limited future supply is expected to further support market fundamentals. There will be no new supply delivered this year, and only three major office developments currently under construction, representing approximately 176,000sq m of new premium supply through to 2029, with around 70% already committed.

Knight Frank Partner, Head of Office Leasing NSW John Brasier said the shortage of new premium supply was likely to place further upward pressure on rents over coming years.

"Occupiers continue to compete strongly for high-quality space in the CBD Core, with this precinct capturing more than 40 per cent of leasing activity since 2025 – a share we expect to continue as the current demand cycle strengthens,” he said.

"At the same time, the development pipeline remains exceptionally limited. With around 70% of the 176,000sqm currently under construction already committed, there is only a relatively small amount of new space that will be available to the broader market.

"With vacancy continuing to tighten and very little new supply expected beyond the current development cycle, we expect face rental growth to continue at a similar rate, whilst landlords gain greater scope to tighten incentives, leading to stronger effective rental outcomes."

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For further information, please contact:
Vanessa De Groot – Marketing & Communications, Knight Frank
Vanessa.degroot@au.knightfrank.com +61 410 460211

Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, the Knight Frank network has 600+ offices across more than 50 territories and more than 20,000 people. The Group advises clients ranging from individual owners and buyers to major developers, investors, and corporate tenants. For further information about the Firm, please visit www.knightfrank.com.