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Net effective rents across Australia's three largest CBD office markets have recorded their strongest annual growth since the pandemic, with a widening gap between premium core precincts and secondary locations underscoring acute demand for top-tier workspace.
Knight Frank's Q1 2026 Australian Office Indicators report shows Sydney CBD net effective rents climbed 10.2 per cent over the 12 months to the end of March 2026, while Melbourne CBD rose 6.8 per cent and Brisbane CBD jumped 11.7 per cent - the fastest pace of growth any of the three markets has posted since the onset of COVID-19.
The gains have been sharpest in the most sought-after submarkets.
Sydney's Core precinct saw net effective rents surge 14.3 per cent annually, while Melbourne's Eastern Core - anchored by blue-chip tenants and newer stock - leapt 16.1 per cent.
The divergence has pushed core rents 54 per cent above non-core equivalents in Sydney and 93 per cent above non-core in Melbourne, highlighting the premium occupiers are willing to pay for quality, amenity-rich space.
A separate Knight Frank Asia-Pacific Q1 2026 Office Highlights report found Australian cities are among the region's standout performers.
Sydney's prime net face rents grew 8.6 per cent and Brisbane's 8.2 per cent, placing both markets behind only Bengaluru and Tokyo for the fastest rental growth across the Asia-Pacific.
Across the 24 cities tracked in the APAC report, 18 recorded stable or rising rents during the quarter.
“Occupier demand continues to be heavily concentrated in the most desirable CBD precincts and the highest-quality buildings, accelerating a sharp divergence between core and non-core markets,” says Knight Frank senior economist Alistair Read.
“Rental growth in suburban markets remains subdued, with tenant demand largely skewed to the CBDs.
"Of the suburban markets, Southbank in Melbourne has performed relatively well, with annual net effective rental growth of 2.7 per cent.”
Read notes that geopolitical uncertainty is creating headwinds for the broader economy by keeping interest rates elevated through 2026.
Higher borrowing costs weigh on development feasibility and occupier sentiment in the near term.
“However, over the medium-term, the fundamentals of a supply constrained environment persist, and the longer-term trajectory for interest rates points lower around late 2027 to 2028," says Read.
“Economic rents remain well above expected market rents, making the construction of new office towers largely unviable, and concentrating tenant demand into existing buildings.”
Brisbane's 11.7 per cent net effective rent increase was the strongest of the three CBDs, reflecting tight vacancy conditions and limited new supply in the Queensland capital's prime precinct.
Sydney's broader market also benefited from continued return-to-office momentum, with incentive levels compressing as landlords regain pricing power in core buildings.
Melbourne, while posting the lowest headline growth of the three cities at 6.8 per cent, showed the starkest core-to-non-core rent gap at 93 per cent - suggesting occupiers are consolidating into the best available stock and leaving secondary buildings to compete aggressively on price.
The results point to a two-speed office market nationally, where premium, well-located buildings with strong ESG (environmental, social and governance) credentials and modern amenity continue to tighten while older, non-core stock faces prolonged leasing headwinds.
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