Melbourne CBD Today
Melbourne is one of my favourite cities in the world and reminds me so much of Chicago, a place close to my heart. Melbourne is a relatively flat, large area with almost no bounds. There is a river running through its heart and it has a big CBD. But most importantly, Melbourne has a fantastic food, beverage, and sport culture. No wonder Melbourne has been voted as one of the most liveable cities in the world.
However, the office building side of things has changed drastically since the pre-covid uptake boom. There is an abundance of activity after hours, and on the weekends, that reflects the cultural and entertainment leadership the city takes. But, during the working day, the CBD is proportionately nowhere near as active as the other capitals. It’s an issue being raised all the time.
Something is going to have to give.
Melbourne CBD office for the second half of 2024
– Stock: largest CBD in Australia
– New supply: more to come and includes 7 Spencer (45,000 m2), 435 Bourke (62,000 m2)
– Vacancy: 18% with 1.6% of this being sublease
– Absorption: net absorption of negative 44,962 m2 for a total of negative 60,397 m2 for 2024
– Absorption: 6 month net absorption average in the 5 years to January 2020 was positive 46,071 m2
– Absorption: 6 month net absorption average in the 5 years since January 2020 has been negative 20,053 m2 –
Melbourne has been here before. In the early 90’s vacancy was high, and property values fell. Since the peak of 2022, values have fallen between 20-30% (AFR December 2024). Some will continue to fall because no matter the grade of building, all tenants are targets for vacant space. Loyalty runs only so deep. The lessors who meet the market are securing tenants. Those that aren’t will be left behind.
This is where the real opportunity lies. Necessity is the mother of invention. Melbourne has a chance to innovate, transform and re-purpose just like it did in the 1990’s. Keep the good bits. Change uses, change occupancy and think of the sustainability benefits – for businesses, for ownership, and for the environment.
Melbourne has bounced back before and will do it again. It will be fascinating to see how this all pans out over the coming years.
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