Sublease availability in Sydney's CBD has reached a four-year low, as major banks withdraw offerings, signalling a potential turning point for office demand.
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Sydney CBD sublease vacancy continues to fall over 2025
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JLL Research has recorded a continued normalisation in Sydney CBD sublease availability over the past couple of years. This metric has fallen to 79,578 sqm or 1.5% of total Sydney CBD stock as at Q1 2025 – the lowest level since Q2 2020. Falling sublease availability can be a leading indicator for future office demand as it suggests organisations have greater clarity for their future space needs. This trend played out in the Sydney CBD in 2024, where net absorption totalled 86,421 sqm – the highest annual result for the market since 2015. The strong net absorption result was broad-based and supported by falling sublease availability, centralisation activity, positive large tenant (>1,000 sqm) relocations, as well as small tenant (<1,000 sqm) leasing demand.
Figure 1: Sydney CBD Sublease Rate, Q1 2025
Source: JLL Research
The fall in sublease availability shows that corporate Australia has adjusted to hybrid work practices in a post-COVID era. The key falls in the sublease included:
- The Commonwealth Bank of Australia (CBA) withdrawing its sublease space at Darling Square, 35 Tumbalong Boulevard in Q1 2024 (22,783 sqm)
- Westpac is removing its sublease offering at International Tower 2, 200 Barangaroo Avenue (4,588 sqm)
These two moves alone account for 30.2% of the reduction in sublease space from the peak of the market in Q4 2020, when over 170,000 sqm of sublease space was available.
A significant portion of the Sydney CBD sublease space offered to the market this cycle was in quality premium or A-grade stock. Since the peak of sublease availability in Q4 2020 (170,285 sqm), we have recorded 37 major tenants (>1,000 sqm) relocate into available sublease space. These deals can be broken down into some key themes:
- Nine of the sublease moves involved tenants relocating into better quality space within the Sydney CBD. Graincorp made the largest of these moves, relocating from 175 Liverpool Street to International Tower 2, 200 Barangaroo Avenue (3,500 sqm).
- Three of the sublease moves were centralisations, where tenants relocated from outside the Sydney CBD. TPG Telecom conducted the largest of these relocations, from 177 Pacific Highway, North Sydney, to International Tower 2, 200 Barangaroo Avenue (9,248 sqm).
- At the precinct level, the Western Corridor recorded the largest number of sublease deals (17), followed closely by the core precinct (14). Over the past two years, tenants have quickly taken up available sublease space in new core precinct assets such as Quay Quarter Tower, 50 Bridge Street and Salesforce Tower, 180 George Street, securing the last remaining contiguous floors within these new buildings.
Sydney’s CBD 20-year average sublease vacancy rate is 1.3%. We expect sublease availability to trend downward towards this figure in the short term. This is likely as demand remains steady while new office completions are limited compared to the supply influx over the past couple of years.