Premium office space drives sharp rental surge across Australia’s CBDs

Australia’s major CBD office markets are recording some of their strongest rental growth since the pandemic, with businesses increasingly prioritising premium office space despite elevated geopolitical and economic uncertainty.

Knight Frank’s Australian Office Indicators Q1 2026 report found net effective rents in Sydney and Melbourne CBDs rose at their fastest annual pace since COVID-19, increasing 10.2 per cent and 6.8 per cent respectively over the 12 months to March.

Brisbane posted the strongest growth nationally, with net effective rents climbing 11.7 per cent over the same period.

The report points to a widening divide between prime CBD office towers and secondary office stock, as occupiers increasingly focus on quality, location and workplace amenity when making leasing decisions.

Knight Frank Senior Economist, Research & Consulting Alistair Read said demand remained heavily concentrated in premium assets within core CBD precincts, helping drive stronger rental growth in top-tier buildings.

“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,” Mr Read said.

According to the report, Sydney’s Core precinct and Melbourne’s Eastern Core significantly outperformed broader CBD markets over the past year.

“In Sydney’s Core precinct and Melbourne’s Eastern Core, net effective rents surged 14.3% and 16.1% over the past year, significantly outperforming the rest-of-CBD precincts,” Mr Read said.

The rental gap between prime and non-prime office locations has also continued to widen sharply.

“As a result, core CBD rents are now 54% higher than non-core locations in Sydney and 93% higher in Melbourne, highlighting the growing premium placed on amenity, accessibility and workplace quality,” he said.

Knight Frank said the strong rental growth across the major CBDs was being underpinned by a limited supply pipeline, with few new office developments expected to be delivered in the near term.

Mr Read said subdued construction activity was likely to support ongoing rental growth and tighter vacancy rates over the medium term, particularly for premium office towers.

“The combination of sustained demand and declining levels of new development will aid ongoing prime rental growth and lower vacancy rates over the medium term, particularly for best-in-class assets,” he said.

The report noted that current economic conditions were making new office developments increasingly difficult to justify financially.

“Economic rents remain well above expected market rents, making the construction of new office towers largely unviable, and concentrating tenant demand into existing buildings,” Mr Read said.

While suburban office markets generally remained subdued compared with CBDs, Melbourne’s Southbank precinct was identified as a relative outperformer, recording annual net effective rental growth of 2.7 per cent.

The report comes as broader Asia-Pacific office markets continue to stabilise following several years of disruption linked to hybrid work trends, inflation and rising interest rates.

Knight Frank’s separate Asia-Pacific Q1 2026 Office Highlights report found Sydney and Brisbane were among the strongest-performing office rental markets in the region, behind only Bengaluru and Tokyo for annual prime net face rental growth.

The Asia-Pacific report also found 18 of the 24 cities monitored across the region recorded stable or increasing rents in the first quarter of 2026, even as geopolitical uncertainty intensified following escalating conflict in the Middle East.

The Sydney developer-builder, which typically retains its projects, is offering 54 residences off the plan on Spencer Street, with prices starting at $3.9 million.

HSN Property Group has launched Maison Jolene in Rose Bay, giving buyers a rare opportunity to purchase off the plan from a developer-builder that has spent more than two decades building a predominantly build-to-hold portfolio in Sydney’s eastern suburbs. HSN values that portfolio at $4 billion.

Located at 2–16 Spencer Street, Maison Jolene comprises 54 residences, including house-sized two- and three-bedroom apartments, sub-penthouses and penthouses. Prices start at $3.9 million, according to HSN, with many residences designed to capture views across Rose Bay, Sydney Harbour and the city skyline.

James Nixon, head of projects at The Rubinstein Group, is handling the sales campaign alongside agency founder Gavin Rubinstein. He says the launch is an unusual opportunity for buyers who have followed the developer’s work.

“HSN is renowned for building entire projects and rarely selling a single apartment to the open market, so Maison Jolene really is a first for potential buyers who have been following the brand across previous projects,” Nixon says.

HSN worked with architecture practice MHN Design Union and interiors studio The Unlisted Collective on the development. A rhythm of arches and deep-set openings gives the building its presence on Spencer Street, while the residences are positioned to make the most of natural light, privacy and outlook. Landscaping frames the arrival and carries through to the shared outdoor spaces.

“Maison Jolene was conceived to bring a touch of European elegance to Rose Bay, drawing on the understated charm of Mayfair and the romance of Paris while remaining grounded in the relaxed character of Sydney’s eastern suburbs,” says Rafi Assouline, founder and director of HSN Property Group.

The apartments were designed with established Rose Bay downsizers in mind. Large kitchens, generous storage and flexible living areas are intended to ease the move from a family home, with layouts that can also accommodate families and professionals looking for more space in an apartment.

The shared amenities are designed as an extension of those homes. Residents will have access to a lounge, private dining room and landscaped alfresco entertaining area. A wellness retreat brings together a magnesium pool, cold plunge, sauna, steam room and heated stone recovery bench, alongside a gym and dedicated space for Pilates and yoga.

Inside the apartments, the curves of the façade recur in the cabinetry and balustrades. Custom wall sconces, tapware and patterned parquetry sit alongside carved marble basins, hammered-glass shower screens and recessed stone niches. Timber veneer wardrobes have leather-clad drawers, while an Art Deco-inspired motif appears in the raised ceiling detail, joinery and built-in velvet bedheads.

“Maison Jolene is at once contemporary and old world, with custom-designed parquetry flooring and an art deco-inspired motif juxtaposing with the curvature of the arched facade, balustrade and internal cabinetry,” Assouline says.

The kitchens bring several of those ideas together in a sculptural, bubble-shaped island. Assouline helped design and engineer the curved form and personally selected the marble, which is bookmatched so the veining mirrors across adjoining pieces.

“With each of our projects, I look for symmetry in design,” he says. “Crafting the apartments is like solving a puzzle of one thousand pieces; one little detail wrong could mean the picture doesn’t translate correctly once it’s finished.”

HSN will develop and build Maison Jolene, overseeing the project from design through to construction. The family-owned company says it has delivered more than 270 homes, has 200 apartments under construction and has a 100 per cent completion record.

“As a private, integrated developer-builder, we maintain close control over every stage of a project,” Assouline says. “We see our projects as collaborative partnerships with our architects, interior designers and specialist trades with whom we have refined a very unique aesthetic, to ensure every detail is considered for those who will live there.”

For Nixon, the developer’s involvement in both design and construction is part of the pitch to buyers. “The attention to design excellence, combined with HSN’s proven track record in delivering ultra-high-end developments, ensures a level of rarity and enduring quality seldom seen in today’s market,” he says.

“To purchase an HSN property is to acquire a property that will not just hold its value but stand the test of time as a timeless piece of Sydney real estate.”

The Spencer Street address puts residents close to Rose Bay’s village cafés and restaurants, foreshore walks and ferry service, with beaches, golf courses and schools nearby. Maison Jolene is now selling off the plan through James Nixon and Gavin Rubinstein.

Premium office space drives sharp rental surge across Australia’s CBDs

Office rents in Sydney, Melbourne and Brisbane are climbing at their fastest pace since the pandemic as tenants compete for premium CBD space amid tightening supply.