The Melbourne CBD office market continued to be defined by strong demand for premium office space in the latter half of 2022 as large numbers of employees headed back to the office, according to fresh data from the Property Council of Australia.
The Property Council’s latest Office Market Report released today reveals that demand for Premium and A Grade office space in Melbourne has increased by more than 40,000 square metres in the six months to January.
While the report shows vacancy rates have increased to 13.8% in January from 12.9% in July 2022, this is wholly accounted for by new office space coming onto the market, demonstrating fundamental stability in the Melbourne commercial office market.
In an encouraging sign for the Melbourne sublease market, sublease vacancy dropped 0.7 per cent, although it remains above the long-term historical average.
Property Council Victorian Executive Director Cath Evans said that the latest Office Market Report results were reassuring and highlight the resilience of the Melbourne office market and demonstrate the continued quest by employers to seek out office space that provides high levels of amenity to their staff.
“With a combined 40,054 square metres of increased demand for Premium and A Grade office space compared to 6 months ago, this confirms what most in the industry already knew to be true – providing engaging and enjoyable office space is the name of the game at the moment,” Ms Evans said.
“This underscores that organisations continue to see a place for them and their staff in our CBD as an essential element of doing business.
“While new supply has increased total vacant space, these numbers are fundamentally a vote of confidence in our CBD,” she said.
The January 2023 edition of the Office Market Report, which is released twice a year, shows that overall CBD vacancy increased from 12 to 12.5 per cent nationally. Non-CBD areas saw a decline from 15.2 to 15.1 per cent, with tenant demand lifting 0.3 per cent.
Melbourne fared slightly better than Sydney, with the harbourside city recording an increase in vacancy rates of 1.2 per cent from 10.1 to 11.3 per cent, while Adelaide recorded a jump from 14.2 to 16.1 per cent off the back of above average supply coming onto the market.
Ms Evans said that Melbourne would continue to see strong levels of supply come onto the market over the next few years.
“Looking forward, there is just shy of 300,000 square metres of supply in the pipeline with 16.4 per cent of it having been pre-committed,” she said.
According to the most recent Property Council Office Occupancy survey, Melbourne CBD occupancy continued to rise over the final few months of 2022 as Victorians continue to their return to the office.
The November results of the survey recorded Melbourne office occupancy at 57 per cent, up 12 points from October.
Ms Evans said that these results when taken together paint an encouraging picture, although there was still work to be done.
“With the Victorian election now over and the first year of the new term ahead of us, the Property Council looks forward to collaborating with all levels of Government to unleash the full potential of our CBD,” she said.
ENDS
Media contact: Dominic Raff | 0478 819 525 | [email protected]