Next steps in return to office roadmap crucial as office market transitions

Melbourne’s office vacancy rate has increased to 8.2 per cent over the last six months, according to the Property Council of Australia’s bi-annual Office Market Report, reflecting a significant increase of new office supply and COVID-related subleasing trends.

The significant increase in new office supply provides great opportunities for businesses embarking on a return to the office in 2021.  It also reflects a trend towards prime grade office space as vacancy levels in older offices pave the way for strong take-up of new office supply.

More than 350,000 sqm of office space was added to the Melbourne CBD market in 2020, with another nearly 390,000 sqm to enter the market over the next three years.  This new supply is the result of a strong record of planning approvals and development activity in recent years in Melbourne’s CBD.

However, the impact of the coronavirus pandemic and Victoria’s extended lockdown – which included work from home orders – can be seen in an overall reduction in demand for office space, which is entirely concentrated in secondary grade office space.

The net absorption decline recorded over the last six months can be primarily attributed to withdrawals and decreased demand for B grade office stock, while demand for premium and A grade stock remain strong.

As expected, the sublease vacancy rate has also risen in the last six months, more than doubling since July 2020.  This rate of increase is significant although it remains well behind that of the Sydney CBD. Melbourne’s subleasing activity partly reflects reduced medium-term business confidence and also the take up of new A-Grade office space.

Office vacancies are calculated on whether a lease is in place for office space, not whether the tenant’s employees are occupying the space or working from home.

The Property Council of Australia is actively tracking office occupancy data through our periodical Office Occupancy Survey.  The next edition of this survey is due to be released in the coming days.

A summary of the national Office Market Report data can be found at

Quotes attributable to Property Council Victoria Executive Director, Danni Hunter

“As employees return to the office in line with the State Government’s health advice, employers will be in a more informed position over the coming months about their future workspace needs. Our Office Market Report shows there will be plenty of quality options throughout the CBD and central city with the safety and flexibility the modern workplace requires.

“Despite the cautious predictions for the Melbourne office market, the Property Council’s Office Market Report shows there’s still significant strength in the commercial office sector in Melbourne.

“We welcome the Victorian Government’s announcement earlier this week of the next steps on the return to office roadmap, allowing the private and public sector to start plan a more complete return with greater certainty and confidence. This is crucial to Melbourne’s CBD recovery, and Victoria’s broader economic recovery.”

Media contact: Matthew Kandelaars | M 0416 443 555 | E [email protected]