Secondary Office Buildings Will Be “Aged Out” in 2026

The phrase “aged out” is becoming a regular term in property circles, and for good reason. It refers to buildings that’ve fallen behind the market’s expectations in tenant appeal (i.e. design, efficiency, sustainability, etc), to the point they’re no longer seen as a valuable premises to lease or purchase without major reinvestment.

And, according to several major agencies, 2026 is shaping up to be the year when Australia’s secondary office stock officially tips into this category.

For investors, that’s not a problem long off in the distance, but quite close at hand. If you’re holding or considering an office asset that isn’t premium grade, now could be the time to think about how the next 12 months could reshape its value.

How we got here

Across Australia’s capital cities, vacancy rates have climbed to their highest levels in decades (around 14.3 per cent nationally after a 30-year high in mid-2025) and pundits expect those numbers to rise further into 2026 as new premium developments come online.

Older “B”, “C” and “D” grade office buildings (often dubbed secondary stock) are feeling the full weight of this vacancy shift. Many are losing tenants, offering heavy incentives or struggling to justify upgrades. The “flight to quality” that began after the pandemic is now accelerating, and for many older buildings, 2026 could be breaking point.

Why office landlords need to take note

Secondary grade office assets have seen values fall much faster than prime stock, with some estimates suggesting declines of nearly 30 per cent since 2022.

Meanwhile, leasing conditions are fragmenting. Tenants want smart systems, sustainable design, end-of-trip facilities, flexible layouts and proximity to transport and hospitality—not dated foyers and dim corridors. The cost to retrofit these standards is steep, and for many landlords, simply uneconomic. As a result, a growing portion of Australia’s office market is becoming functionally obsolete, a trend industry insiders expect to peak in 2026.

For existing investors: Should you be thinking about exit?

Put it this way: it’s worth revisiting your position.

The conversation isn’t just about vacancy rates; it’s about survival in a bifurcating market. Start by reassessing your building’s true status. If it’s been quietly slipping from “A grade” to “B grade”, you may already be in the danger zone. Check where rents and incentives sit compared to competing buildings, and if you’re offering more concessions just to stay leased, that could be an early warning sign.

Look at your lease expiry profile heading into 2026. Are your key tenants locked in long-term, or are major renewals due next year? If leases are rolling over and the building isn’t up to scratch, you could face a significant hit to income or long vacancies. With many tenants consolidating into fewer, higher-quality spaces, backfilling older stock is harder than ever.

The numbers speak volumes

Market data is already confirming the divide. Premium buildings are maintaining occupancy and rental growth, while secondary stock continues to soften.

And of course, rising construction costs could also mean the gap between refurbishment cost and achievable rent is widening, making redevelopment less viable. In other words, the economics are turning against older office buildings, and investors who ignore the “aged out” trend risk being left with assets they can’t divest.

The takeaway

2026 might not just be another year in the office cycle. It could be the point where Australia’s secondary office buildings are formally aged out of competitiveness.

For investors, the question isn’t if the shift happens, but how soon it affects your portfolio. Whether you choose to upgrade, reposition or exit, the time to act is before the market forces your hand.

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