Headline vacancy increases despite positive net absorption

• We recorded 4,400 sqm of net absorption in Q1 2025. While several large tenant moves (>1,000 sqm) were recorded over the quarter, positive net absorption was mainly driven by smaller tenants.
• Despite recording positive net absorption over the quarter, the headline vacancy increased to 9.2%. This was due to the completion of One City Hill, which was fully vacant at completion.

One City Hill construction completes over the quarter

• Construction of One City Hill was completed in Q1 2025, adding 33,000 sqm of stock to the market, and two withdrawals totalling 3,500 sqm were recorded over the quarter. As such, Canberra’s total office stock currently stands at 2.3 million sqm.
• A further seven projects are currently under construction, totalling 193,000 sqm, with a blended precommitment rate of 75%. Of these projects, only one project, 7 National Circuit (2,200 sqm) is expected to complete later this year.

Prime and Secondary yields remain stable

• Prime net effective rents increased 3.0% over the quarter and 3.7% year-on-year. Secondary net effective rents declined by 2.6% quarter-on-quarter and 2.8% year-on-year.
• Prime yields in Canberra remained stable over the quarter, ranging between 6.50 and 7.75%. Secondary yields also remained stable at 7.75% to 10.50% over Q1 2025.

Outlook: Office market outlook is contingent on 2025 Federal Election outcome

• Headline vacancy is expected to remain stable in 2025, before increasing in 2026 on the back of a number of completions and large government department moves.
• The 2025 Australian Federal Election outcome could substantially impact demand for office space in Canberra in the near-term. A change in government could lead to shifts in policy priorities, potentially affecting the size and structure of the public service.