Stability and growth on offer in Australia's capital

In an era of market volatility and economic uncertainty, Canberra emerges as a beacon of stability within Australia's commercial real estate landscape. The nation's capital presents a compelling investment proposition underpinned by robust fundamentals, government stability, and exceptional quality of life metrics that position it as a distinctive opportunity for discerning investors seeking sustainable returns.

Canberra has established itself as Australia's most resilient office market, achieving the second-lowest vacancy rate nationally at 9.2% among 19 office markets tracked by JLL. This performance becomes even more impressive when considering that the only market with lower vacancy—Norwest at 8.9%—represents merely a tenth of Canberra's market size at 270,300 square metres.

The market's stability reflects decades of consistent performance. JLL's net absorption data extending back to 1987 reveals that Canberra has recorded 33 years of positive net absorption over 38 years—the highest number among Australia's six main CBD markets. This exceptional track record underscores the market's fundamental resilience, driven by sustained government demand and a diversified professional services sector.

Economic fundamentals further support this stability, with the ACT delivering annual Gross State Product growth of 3.7% over the 12 months to Q1 2025, significantly outpacing the national average of 2.5%. A-Grade office vacancy at 8.1% substantially outperforms the national average of 16.2%, highlighting the premium placed on quality assets.

The federal government's net zero commitments are reshaping Canberra's office landscape, creating distinct opportunities for forward-thinking investors. New leases exceeding four years and 1,000 square metres signed after July 1, 2025, must meet minimum 5.5-star NABERS ratings. With government entities occupying over one million square metres yet only 440,000 square metres of 5.5+ star rated space currently available, and limited new supply planned, a supply-demand imbalance is emerging.

This regulatory shift creates opportunities for building owners to undertake strategic capital expenditure projects that enhance NABERS ratings and command premium rents, while potentially creating a divergence between high-performing sustainable assets and outdated stock.

Canberra's retail market demonstrates exceptional performance metrics, with neighbourhood shopping centre vacancy at just 2.5% compared to the national average of 4.9%, and CBD retail vacancy at 2.0% versus the national benchmark of 10.0%. The city achieves the lowest neighbourhood and CBD vacancy rates among Australia's six major cities, supported by average household incomes 30% above the national average.

The market's stability stems from Canberra's unique urban planning approach, organised around a tiered retail hierarchy featuring major town centres and smaller retail villages anchored by supermarkets. This structure creates consistent consumer traffic patterns regardless of broader economic conditions.

Canberra's residential market offers compelling fundamentals for income-focused investors. With median apartment values at $590,000 and rental yields reaching 5.1%, the market provides attractive returns compared to national averages. Low vacancy rates of 1.5% drive consistent rental growth and investment stability.

The expanding light rail network presents transformative opportunities, with the planned Woden extension expected to boost medium-to-high density housing demand along transit corridors. Population centres along existing routes are projected to grow 7% annually over the next two decades.

Canberra's distinction extends beyond market metrics. The city ranks number one globally for Quality of Life in the Oxford Economics Global Cities Index, analysing 1,000 cities worldwide. This recognition reflects the capital's unique combination of economic stability, infrastructure investment, and livability factors that underpin sustainable commercial real estate performance.

The convergence of government stability, infrastructure development, regulatory drivers, and exceptional demographic characteristics positions Canberra as a compelling alternative for investors seeking diversification beyond traditional gateway markets. As Australia's capital continues evolving while maintaining its fundamental stability, nimble investors have the opportunity to capitalise on this distinctive market's growth trajectory while benefiting from the defensive characteristics that have defined Canberra's commercial real estate sector for decades.

To read further analysis, access our report of the Canberra market for private investors: link