Melbourne commercial vacancies reach 20-year high

Danni Hunter, Victorian executive director for the Property Council of Australia, warned that “these numbers and declining office occupancy reinforce the urgent need for a plan to revitalise our CBD and ensure Melbourne continues to be a place to live, work and invest”.

Research by the Property Council of Australia found that Melbourne CBD vacancies are at their highest level since January 2020, with St Kilda Road and South Bank recording significant increases of 16.3 per cent and 15.2 per cent over the past six months, respectively.

Vacancies within the Melbourne CBD increased by 10.4 over the past six months. The Property Council noted that this figure represented a 2 per cent increase on the previous six-month period and an increase over the previous record lows of July 1996.

The Property Council also noted that Melbourne was the only CBD in Australia to experience negative demand over the past six months, with all other capital cities except for Sydney recording vacancy rate decreases over the same period of time.

Pointing to a sharp uptick in Melbourne’s subleasing vacancies rate and the “handing back” of over 96,000 square metres of office space from tenants to the market, Ms Hunter stressed that “the cycle of lockdowns has clearly shocked business confidence”.

She said that within the commercial property industry, there is “residual uncertainty about the future” despite an expected boost in supply over the next six months.

With over 222,000 square metres of additional commercial real estate expected to enter the market in the second half of 2021, Melbourne is said to account for half of all new office space nationwide during the period.

All the same, Ms Hunter called on the Victorian government toa respond to this crisis through a number of policy mechanisms, including “a hybrid working model that enables people to work from home and the office, a stimulus package targeted at preserving CBD businesses, and an aggressive attraction strategy for national and global headquarters to locate in Melbourne’s CBD”.

“We need the Victorian government to come to the table with a plan to get people back to the city and encourage investment in our CBD,” she said.