Australia Real Estate: Office: Moving towards a more supply constrained 2028

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Australia Real Estate: Office: Moving towards a more supply constrained 2028

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24 Jun 2026 21:14:32 ET │ 32 pages

Australia Real Estate

Office: Moving towards a more supply constrained 2028

CITI'S TAKE

Australian Real Estate Team

Australian office continues to improve off a challenging base towards a

better supply-demand environment from 2028. In 1Q25, Sydney's vacancy Howard Penny AC

declined to 14.1% - the best absorption quarter in years - while Melbourne +61-2-8225-4819

deteriorated further to 19.7%, burdened by corporate downsizing and a howard.penny@citi.com

structurally challenged secondary market. The flight to quality remains a

strong theme: Prime assets are absorbing strongly, secondary stock faces Suraj Nebhani, CFA

functional obsolescence. A constrained supply pipeline, particularly post- suraj.nebhani@citi.com

2027 in Sydney, supports our constructive medium-term view on rents. We Akshit Batra

adjust our assumptions downwards for DXS which faces near-term

headwinds from fund redemption outflows and elevated financing costs, akshit.batra@citi.com

supporting our Neutral stance.

Vacancy trends — Sydney CBD vacancy fell to 14.1% while Melbourne deteriorated

to 19.7%. We view Sydney's trajectory as a clear positive; Melbourne's secondary

market faces structural obsolescence.

Flight to quality — B-grade vacancy in Melbourne hit 27.7% vs. Premium at 17.4%.

Rents — Sydney and Brisbane prime effective rents surpassed pre-COVID levels;

supply remains constrained post-2027.

Stock views — GPT — Buy: We view continued execution in funds management and

strong portfolio momentum as the key positives, supporting our constructive stance

on the stock. CHC — Buy: We view Charter Hall as a leader in funds management