Melbourne CBD office vacancy rate stuck at 18 per cent, the Property Council says

Melbourne’s CBD office vacancy rate continues to be the worst in the nation and needs Victorian government leadership to encourage people back into the city, says the Property Council.

The Melbourne CBD’s office building occupancy rate is the lowest in Australia.

“Active leadership” is needed from the Victorian government to turn around the fortunes of Australia’s second largest CBD, the Property Council says.

The organisation’s twice-yearly Office Market Report found Australia’s vacancy rate across the capital cities was stubbornly high and Melbourne maintained its position as the CBD with the most unoccupied space.

Major companies last year issued mandates for their staff to return to the office, but Melbourne continues to lag in its occupancy levels and its vacancy level stayed at 18 per cent, while the rate across the major CBDs increased marginally from 13.6 to 13.7 per cent.

Adelaide and Perth’s level of vacancies decreased, Melbourne was steady, and Sydney and Brisbane rose but that was in line with new supply. The non-CBD office vacancy rate stayed at 17.2 per cent, with the overall vacancy rate for both markets increasing 0.1 per cent to 14.7 per cent.

Property Council chief executive Mike Zorbas said Melbourne continued to be a concern.

“We need to see active leadership from the state government to support the vibrancy of the CBD and help Melbourne remain one of the best cities to visit in the world,” he said.

Mr Zorbas said more than 220,000 sqm of new supply was added to Australia’s major cities in the past six months, which was just below the historical average of over 237,000 sqm.

“We have continued to see the supply of new office space above or near the historical average, providing access to a wealth of new, high-quality office space in our cities,” he said.

“Vacancy levels continue to be driven by this large level of supply, as demand has remained

positive.”

Property Council of Australia chief executive Mike Zorbas.

Sydney’s office vacancy rate rose from 11.6 per cent to 12.8 per cent – driven by 164,552 sqm of new supply being added over the past six months – well above the historical average of 74,361 sqm.

Brisbane’s rose from 9.5 per cent to 10.2 per cent, Perth’s vacancy rate decreased from 15.5 per cent to 15.1 per cent while Adelaide’s dropped from 17.5 per cent to 16.4 per cent.

Canberra’s office vacancy rates fell from 9.5 to 9.2 per cent. Hobart’s vacancy increased from

2.8 to 3.6 per cent – the lowest vacancy rate in the country.

According to CBRE data released in November, the return to the office has been gathering pace in Australia. Australia’s CBD occupancy rate hit 71 per cent of pre-Covid levels in the third quarter of 2024.

However, CBRE head of office leasing, Victoria, Ashley Buller said Melbourne’s occupancy level was at 59 per cent, which was the lowest among major Australian capital cities.

“With white-collar employment growth expected to grow at the highest rate nationally until 2030, we are optimistic about the Melbourne CBD office market’s prospects,” he said.

“The significant right sizing of office space over the past four years has normalised workspace requirements, paving the way for positive absorption.

“While tenant demand, as measured through inquiry volumes, was down by around 10 per cent in 2024 compared to 2023, we observed a higher conversion rate of inquiries to deal transactions.”

The Property Council report said that over the next six months 333,000sqm supply will come online.

This supply is spread out across Sydney (83,048sqm), Melbourne (54,327sqm), Brisbane (43,700sqm), Canberra (87,011sqm), Adelaide (23,826sqm) and Perth (41,193sqm).

New supply can range from new office towers to the completion of a refurbishment or conversion on non-office space.

On a longer time frame, Sydney is set to see 277,048 sqm of supply come online by

2027, with almost half of this space pre-committed.

In Melbourne, 252,627 sqm will come online by 2027 with 26.9 per cent committed to, while Brisbane will see 162,630 sqm of new supply with 67.9 per cent pre-committed to.

Sublease vacancy, a measure of business confidence reflected by businesses renting out parts

of their office space, decreased in both the CBD and Non-CBD markets.

Only Melbourne and Brisbane recorded a sublease vacancy above their historical averages.

Originally published as Melbourne CBD office vacancy rate stuck at 18 per cent, the Property Council says