Australia's real estate firms are cautiously optimistic about what 2019 holds for the office market after a steady performance across the past 12 months.

While pricing expectations were generally exceeded across 2018, the sector faced challenges in the form of bond rates, redemptions, political instability and difficulty in sourcing debt.

CBRE Capital Markets Office National Director Flint Davidson said external factors would most likely continue to influence the market this year.

2019 Australian office market predictions - at a glance

• Melbourne will remain the most sought after location, with Sydney close behind.
• Canberra will see significant trading this year
• Brisbane, Perth and Adelaide will all benefit from the resources recovery and we will see some limited yield compression for prime stock.

"The federal election is expected to create some uncertainty," he said.

"However, uncertainty creates opportunity and the fundamentals for most of Australia’s major markets remain positive, particularly in relation to the leasing market."

"This will underpin continued investor interest in Australia’s commercial property market relative to other asset classes and international markets."

Domestic office leasing has traditionally been dominated by Melbourne and Sydney. 

Knight Frank Head of Office Leasing Partner, David Howson said while they will remain ahead of the pack, other states are gaining ground.

"There is a more even picture emerging across the markets after several years when Sydney and Melbourne have out-performed," he said.

"Rising demand in Brisbane, Adelaide and Perth is underpinned by improving economic growth momentum, and coupled with a lack of new development in these markets, this sets the scene for falling vacancy over the next 12 months. 

"Meanwhile, Sydney and Melbourne continue to see buoyant demand and a constrained supply pipeline over the next 12 months points to another year of strong rental growth and expansion to emerging markets outside the core CBDs.” 

Sources: CBRE, Knight Frank

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