Melbourne Office Vacancy Hits 30-Year High Amidst WFH Uncertainty
Melbourne’s central business district is facing a significant downturn in office occupancy, with vacancy rates soaring to 19.1 per cent in January. This marks the highest level since 1997 and the worst occupancy rate in Australia, raising concerns for the property sector. The surge is attributed to a combination of new office supply and uncertainty surrounding potential government legislation mandating work-from-home arrangements.
Key Takeaways
- Melbourne’s office vacancy rate reached 19.1% in January, the highest since 1997.
- This increase is driven by new office supply and concerns over upcoming work-from-home legislation.
- Nationally, office vacancy rates also rose to 15.9%.
Economic Headwinds and Legislative Uncertainty
The Property Council of Australia has labelled the milestone "concerning," citing years of "harsh economic headwinds" and increased taxes impacting Melbourne’s property sector. Cath Evans, Victorian executive director of the Property Council, highlighted that the "uncertainty about the Victorian government’s unprecedented and looming intervention to mandate the right to work from home" is deterring investors.
The addition of 100,000 square metres of new office space in the city has also contributed to the rising vacancy figures.
Impact of Work-From-Home Legislation
Further exacerbating the situation is the pending legislation that aims to grant millions of Victorians the legal right to work from home for at least two days a week. Premier Jacinta Allan has indicated that legislation will be introduced in 2026 to allow public and private sector employees, whose jobs can reasonably be performed remotely, to do so.
However, business groups have voiced strong opposition. Bran Black, chief executive of the Business Council of Australia, warned that "the proposal for a one-size-fits-all mandate will drive investment and jobs away from the state at a time they’re needed most."
A Glimmer of Optimism
Despite the current challenges, there remains "long-term faith" in prime office space within the CBD. Evans noted that Melbourne continues to be an attractive destination for employers, and the increased supply presents an opportunity for tenants to secure favourable terms. Nationally, office vacancy rates have also seen an increase, rising to 15.9 per cent from 15.2 per cent.
