Melbourne office vacancy remains stable but high
Melbourne’s CBD office vacancy rate is stable at 18% – the highest CBD vacancy in Australia. City fringe vacancy has increased slightly to 18.5%.
Flight to Quality Creates Two-Tier Market
The “flight to quality” trend shows no sign of slowing, with higher demand for premium grade office space. Building quality and location significantly affect demand and therefore the incentives available. Vacancy rates for high quality buildings and core central locations can be significantly lower than “headline” vacancy rates.
New Office Supply to Slow in 2025
The pipeline for new office developments is tightening, with 2025 expected to see the lowest annual increase in new CBD office supply since 2018. This is another reason why competition for high-quality, well-located office space is likely to remain strong.
Costs for Fit-Outs and Make Goods Remain High
With fit-out costs at record highs, tenants should explore options to save money. Some landlords are retaining existing, high quality fit-outs and offering them to incoming tenants with a full market incentive as well. If you do undertake a fit-out, make sure your team includes a tenant representative and quantity surveyor to control costs.
Similarly, make good costs are also high. So, CFOs should review provisions for make good well in advance and assess whether additional funds or renegotiations with landlords are needed to avoid financial surprises at lease expiry.
Plan Ahead to Get the Best Deal
Whether renewing your lease or relocating, planning ahead is essential. You should assess your future space requirements 18-24 months before lease expiry to allow for thorough planning and stronger negotiation leverage. Early preparation ensures access to preferred buildings, maximises incentives, and secures the most favourable lease terms in a competitive market.
Vacancy rates
Melbourne CBD – 18%
Melbourne Fringe – 18.5%
