Perth Office Market Braces for Rising Vacancy, Hybrid Work Shift

Perth's commercial property sector is navigating treacherous waters as 2026 unfolds, with a confluence of structural challenges threatening to reshape the office landscape that has anchored the city's economy for decades.

Vacancy rates across the Perth CBD have climbed to levels not seen since the post-2008 financial crisis, with the latest quarterly data showing 12.8 per cent of Grade A office space sitting empty—up from 8.2 per cent just two years ago. On St George's Terrace, traditionally the city's most prestigious address, landlords are increasingly offering incentives including rent holidays and fitout contributions to attract tenants, signalling a pronounced shift in tenant power.

The persistent hybrid work model, accelerated by pandemic-era practices that proved more durable than many anticipated, continues to suppress demand. Major corporates occupying towers along the Terrace and throughout the business district are consolidating their footprints, requiring less physical space as flexible arrangements become embedded in workplace culture. This structural shift has proven more intractable than temporary disruption.

Adding pressure is the broader economic uncertainty rippling through global markets. Interest rate expectations and tightening credit conditions have made refinancing existing developments increasingly expensive for landlords, while development pipelines have slowed considerably. Several planned office projects in South Perth and East Perth have been shelved or delayed indefinitely.

The Northbridge precinct, historically relied upon to absorb overflow demand from the CBD, has struggled to differentiate itself, with many newer facilities competing on price rather than amenity. Meanwhile, established office clusters in Subiaco have seen tenants migrate back to the CBD, creating a fragmented market where location arbitrage no longer delivers the value it once did.

Retail landlords have dominated headlines during the post-pandemic adjustment, but commercial property investors and agents quietly acknowledge that office exposure now presents the more persistent headache. Unlike retail, which has stabilised around a new equilibrium, office markets remain in flux—victims of a permanent recalibration in how businesses view real estate.

Some bright spots persist: premium, recently refurbished space with strong sustainability credentials continues to attract interest, and the emergence of mixed-use developments combining office with hospitality and residential components has found modest appeal. But for conventional office investors holding aging stock without significant capital to invest in upgrades, the outlook remains decidedly cloudy as Perth's commercial property market grapples with a decade of adjustment compressed into just a few years.

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