Traders’ plea as Melbourne’s CBD office vacancy rate highest in the nation

Melbourne has the highest office vacancy rate in the nation and the number of empty desks is growing, prompting small businesses to beg workers to remember them.

Melbourne’s CBD has an office vacancy rate of 18 per cent. Picture: Diego Fedele

Melbourne’s CBD has the highest office vacancy rate in the nation, new data has revealed, as smaller retail and hospitality businesses plead for workers not to forget about them.

The latest office market report, released on Thursday, found that office vacancy in Melbourne’s CBD increased to 18 per cent over the six months to July, up from 16.6 per cent in January and 14.9 per cent in July last year.

The report, published by the Property Council of Australia, has prompted fresh calls from the peak property body for the state government to “show more active leadership” and ensure public servants are attending the office at least three days per week.

But in an “encouraging sign”, the rise in the vacancy rate – which sits above the national average of 14.6 per cent – was partly due to the addition of 69,000sq m of new premium space to the market, rather than a reduction in demand.

Property Council of Australia Victorian executive director, Cath Evans, says she is ‘encouraged’ by some indicators in the report. Picture: Jake Nowakowski. Picture: Alex Coppel.

However, Property Council of Australia Victorian executive director, Cath Evans, said the daytime CBD economy remained “an area of concern”.

“Particularly for those smaller retail and hospitality businesses that don’t have the capacity to cater to changed patronage patterns on Thursday nights and the weekends,” she said.

“There remains a significant body of work to be done by government in collaboration with the industry to address some of the strategic structural challenges facing our CBDs.

“We are however encouraged by some positive indicators in today’s data.”

Six months ago, Adelaide had the highest office vacancy rate in the nation with 19.3 per cent, which dropped to 17.5 per cent in July. They are followed by Perth, which is sitting at 15.5 per cent.

Darren Silverman and his wife, Jackie, who own Black Velvet Coffee on Exhibition St, say some of his customers only come into the office once a week. Picture: Jake Nowakowski

Darren Silverman, who owns Black Velvet Coffee on Exhibition St with his wife Jackie, said he was not surprised by Melbourne’s office vacancy rate, saying some of his customers came into the city once a week or even once a fortnight.

But he urged office workers to think of his fellow hospitality businesses when deciding how many days per week they will work from home.

“It’s not just about Black Velvet,” he said.

“This is about Melbourne.

“The question that has to be answered is: ‘Do you want Melbourne to thrive or do you not?’ If you don’t, then stay home.”

He added: “People … come in for lunch or something like that every once in a blue moon and they can’t believe the place they wanted to go to doesn’t exist anymore.

“Well, where were you prior to that?”

The report has prompted fresh calls for the state government to ensure public servants are attending the office at least three days per week. Picture: Ian Currie

Despite the high vacancy rate, Ms Evans said there was an “ongoing demand” for high-quality office spaces in Melbourne.

“Several significant premium office developments have been delivered in the last six months that are zeroing in on the consistent demand for quality space, sustainable buildings and high amenity precincts,” she said.

“There was a withdrawal of just over 1500 sqm of B-grade office space in the same period, underscoring how governments at all levels need to support subprime owners to revitalise their assets.”

She added that the ability for “subprime office owners” to upgrade buildings was “directly linked” to the capacity of ground-floor retail and hospitality businesses to attract new customers.

“Supporting owners through incentives and red tape reduction will support them to overcome current barriers and allow them to more effectively compete with newer premium grade offices,” she said.

Mr Silverman said the building that houses his business was in desperate need of an upgrade.

“There’s nothing enticing about it,” he said, noting many new office buildings were “plush”.

“This is a bit old. I do remember speaking to one company who was looking at moving into this building and chose not to, for that particular reason.”

Lord Mayor Nick Reece says the city needs to turn vacant lower-grade buildings into valuable resources. Picture: Jason Edwards

Lord Mayor Nick Reece said he recognises there are “challenges” in the property market as Melbourne’s CBD continues to lag behind the rest of the country for office occupancy levels.

But he said the fact there was an additional 69,000sq m of new premium space was a “real vote of confidence in the future of Melbourne as a major business centre”.

“Existing CBD companies are flocking to these premium office spaces, leaving behind B and C-grade buildings that are frankly less attractive to employers or employees,” he said.

“We need to turn these vacant lower-grade buildings into valuable resources for the CBD.”

He said the City of Melbourne will soon be releasing guidelines for developers and the property sector to help facilitate more retrofit projects.