Why Canberra’s headline office vacancy isn’t the full story

When office vacancy rates climb, the instinct is to read them as a uniform market challenge. But in Canberra, and increasingly across other markets, that headline number obscures a more important trend: Vacancy is concentrating and the market is separating premium assets from the rest with brutal clarity.

Canberra's office vacancy reached 10.5% by 2026 – nearly double the 5.5% recorded in early 2022. Yet premium A-Grade assets in Civic, the city’s CBD, and Barton, just 4km south, have achieved rental growth of up to 44% since 2019.

Three-quarters of all vacant space in Canberra sits within just 12% of assets. This extreme concentration means the aggregate vacancy figure dramatically overstates the challenges facing quality properties while understating the structural obsolescence threatening lower-tier stock.

"The headline vacancy rate tells you very little about what's actually happening in the market," says Tim Mutton, JLL managing director and head of Capital Markets, ACT. "Asset owners need to understand where their properties sit in this distribution. Premium assets are holding pricing power and attracting tenants willing to pay for superior workplace experiences, while struggling properties face persistent vacancy regardless of the concessions they offer."

A-Grade vacancy has climbed from 2.7% in early 2022 to 9.7% in 2026, adding 109,000 square metres of vacant space. Yet the market is pricing differentiation with increasing precision. The best assets continue to command premium rents while average properties see flat or declining effective returns.

Technology adoption offers first-mover advantages. Artificial intelligence in property management transforms complex reporting from hours-long exercises into minutes, enabling proactive lease management and portfolio optimisation. Yet only 26% of organisations deploy AI for automated occupancy data collection, with over one-third citing poor data quality as a barrier.

But technology alone doesn't explain rental divergence. A JLL human experience survey of 15,000 respondents reveals the workplace fundamentals that separate premium from average. Sound privacy, which directly impacts knowledge worker productivity, scores lowest. Meeting room availability creates persistent friction as headcount shifts over typical ten-year leases, yet most designs remain static. Even thermal comfort generates disproportionate dissatisfaction when poorly managed.

"Businesses are making increasingly sophisticated decisions about where to locate their teams," says Zoe Ferrari, JLL senior director, Office Leasing and Government Leasing lead. "They're focused on total occupancy cost and workplace effectiveness, not just rental arbitrage. The assets that address genuine workplace experience gaps are creating competitive advantages in talent markets, and that's what justifies premium rents even in an elevated vacancy environment."

Landlords addressing these gaps justify the rental premium they command. This explains why the best assets have achieved 22-44% rental growth since 2019 while aggregate effective rents remain flat. 

The rental spread between premium and average office buildings will continue widening. Assets failing to meet evolving occupier expectations face structural vacancy which reflects functional obsolescence rather than cyclical vacancy that resolves with market recovery.

"Middle-tier properties face the greatest risk," says Andrew Ballantyne, head of Research, Australasia at JLL. "As occupiers bifurcate between cost-minimisation and premium-seeking strategies, properties caught in the middle struggle to compete on either dimension. Significant capital investment may be required to avoid structural vacancy, yet even substantial reinvestment offers no guarantee of competitive positioning if fundamental design constraints remain."

For asset owners, honest competitive assessment is essential. For occupiers, elevated vacancy creates opportunities to secure premium space at favourable terms, but the focus should remain on workplace effectiveness and organisational outcomes rather than short-term rental savings.

While Canberra's dynamics reflect specific drivers including Commonwealth employment trends and major supply additions like the National Security Office Precinct, in Barton, the fundamental pattern is replaying across markets. Vacancy concentrates in assets that can't meet contemporary workplace standards. Quality gets priced with precision. The gap widens.

“Markets are rewarding assets that deliver genuine workplace excellence while exposing those that cannot meet evolving expectations," says Mutton. "The aggregate vacancy rate matters less than understanding which side of that divide your portfolio sits on."