CBRE associate director Thomas Biglands said the recent recovery in return-to-office rates in Sydney is slowing efforts by larger occupiers to downsize their occupancy footprints using the sublease market.

The wave of large sublease listings slowed drastically in the three months to March, with only four new sublease listings of greater than 1000 square metres coming to market.

The ANZ Bank in Sydney is reviewing space at its 161 Castlereagh Street tower. In Melbourne, NBN has 16,000 square metres excess at 655 Collins, formerly known as Media House when it was home to The Age newspaper.

CBRE office senior leasing director Chris Fisher said sublease space with high quality fit-outs are popular with tenants in a “flight-to-quality and a flight-to-value” that is leaving older buildings empty and unloved.

“Tenants are taking advantage of high incentives in the form of rent reduction to relocate to quality office space on favourable terms,” Fisher said.

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The average level of incentives – landlords offering free fit-outs or other rent inducements – in Sydney is peaking around 35 per cent in premium buildings and is even higher in lower-grade properties.

Fisher said contraction from hybrid working is behind 79 per cent of the sublease space handed back in the first three months of this year. But CBRE data shows workers are returning to offices in “ever-growing numbers”.

Excluding the traditionally quieter holiday months of December and January, Australia’s CBD office occupancy rate averaged 76 per cent of pre-COVID levels in the three months to March, up from 67 per cent for the same period last year.

CBRE’s Tom Broderick said the agency expects occupancy levels in Australia to continue to rise over the remainder of the year.

“Businesses are continuing to incentivise workers to encourage this return to office theme and are also investing in higher quality accommodation to earn the commute,” he said.

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