Canberra’s office decentralisation and the future for Civic

Canberra's Civic presents an anomaly among major Australian central precincts. Over the past year, office stock declined 110,000 sqm while vacancy rose 4.8 percentage points Australia’s only central precinct recording simultaneous supply contraction and elevated vacancy (Figure 1). This reflects the Canberra office market's response to shifting Government leasing objectives. Over the past year, Civic recorded net absorption of negative 130,000 sqm, outweighing the rest of Canberra's positive net absorption of 43,000 sqm. Government consolidation drove this contraction as the Commonwealth prioritises a reduced leasing footprint, smaller environmental impact and enhanced amenities. Civic's elevated vacancy appears consistent with temporary displacement during a premium stock upgrade cycle, as the Commonwealth signs long-term leases at specialised offices while securing a lower density footprint at higher rates per square metre. While the Government's total leased area in the ACT decreased by 68,500 sqm from 2024 to 2025, the national cost per sqm increased from $519 to $547, ultimately spending more on a smaller footprint.

Civic's elevated vacancy reflects temporary withdrawal activity and will normalise as a heavily pre-committed supply pipeline delivers alongside increased private sector demand. Canberra has the largest office pipeline under construction of any Australian city, at 230,000 sqm, with over 80% already pre-committed by Government and private tenants. Vacancy may also normalise as owners refurbish or repurpose office buildings, following Civic's expansion to an all-time high in total office area at the beginning of 2026. Leasing enquiries have been increasing year-on-year, representing growing demand among smaller tenants as a wider range of tenants looks to occupy smaller floorplates.

Civic's absorption capacity hinges on owners providing higher-quality supply in meeting energy efficiency and amenity requirements sufficient to attract pre-commitments from both Government and private tenants.  For public sector tenants, this follows the 2025 mandated minimum 5.5-star NABERS Energy rating for new office leases (for 4+ years >1,000sqm) under the Government's net-zero strategy. Stock at the top of the quality spectrum maintains high occupancy rates even as aggregate vacancy climbs, with premium assets commanding sustained rental growth. Three-quarters of vacant space in Canberra is concentrated in just 12% of assets facing structural challenges.

Further demand emerges from private sector expansion within Canberra as more companies grow their footprint in the Capital and compete for Government consulting contracts. The Australian Public Service as a percentage of Canberra employment is declining, with Public Administration and Safety employment as a portion of white-collar employment decreasing by 4% from 2020 to 2026.  Parliamentary Library analysis shows that Commonwealth consulting expenditure shifted between 2021-22 and 2024-25: contracts with Big Four firms (PwC, Deloitte, EY, KPMG) declined 48% from A$218 million to A$114 million, while spending with alternative providers surged 62% from A$496 million to A$803 million. This shift towards smaller and mid-size boutique consultancies will support Canberra's prime office market demand, particularly in Civic.