The race to net zero is accelerating - but Australia’s office markets are struggling to keep up.
With record numbers of occupiers pursuing net-zero targets, demand for all-electric workplaces is far exceeding the supply of compliant space.
Demand outstripping availability
JLL research, The Race to Decarbonise, shows occupiers with net-zero targets account for 3.1 million sqm in Sydney, 2.9 million sqm in Melbourne, and 1.8 million sqm in Canberra.
By 2027, however, total all-electric stock across Sydney and Melbourne CBDs will reach only 1.2 million sqm - just 15% and 7% of total stock.
“The imbalance between demand and available stock will drive competition and upward pressure on rents,” says Annabel McFarlane, Head of Strategic Research. “Tenants with sustainability mandates will need to plan ahead - compliant options will be scarce.”
Proactive landlords seizing opportunity
“Proactive landlords are already conducting electrification feasibility studies and aligning upgrades with lease expiries,” explains Connor McCauley, Head of Sustainability. “This forward planning mitigates tenant flight risk and positions owners to capture future demand.”
These early movers are also protecting themselves from rising retrofit costs as sustainability expertise becomes increasingly sought after approaching 2030 targets.
Obsolescence risk is already here
“Obsolescence is no longer a distant risk - it’s emerging within this cycle,” says Dr Georgia Warren-Myers, Head of ESG & Risk APAC. “Buildings that remain gas-dependent risk declining value and relevance as tenants and investors turn away.”
JLL’s data shows high-performing 5.5–6-star NABERS assets record 9.9% vacancy compared with the 15% CBD average, underscoring the growing ‘brown discount’ for lagging assets.
Preparing portfolios for the next cycle
While elevated construction and financing costs are constraining new supply, the opportunity for landlords lies in strategic electrification.
“The early mover advantage remains,” McFarlane says. “Owners who act decisively now will secure stronger rents, higher occupancy and long-term resilience. For those who delay, the cost of inaction will only compound.”
The message is clear: Australia’s next wave of value growth will come from buildings that are not just efficient - but fully electric, powered by renewable energy and future-ready.