Melbourne CBD’s office market shows positive signs of recovery, with demand for office space growing as Victoria emerged from lockdown
Victorian Executive Director of the Property Council of Australia Danni Hunter said the surge in office demand is excellent news for the sector, business confidence, and Melbourne’s CBD.
“We are confident the CBD is set for a significant rebound in 2022 after the challenges of the last two years,” Ms. Hunter said.
Despite an increase in office vacancy due to new supply coming online, the Property Council’s latest Office Market Report released last week showed demand for office space has surged over the past six months.
The report revealed a total of 45,560sqm of office space had been taken up by new leases, far exceeding Melbourne’s historical average and showing underlying confidence in the office sector despite repeated lockdowns over the past two years.
The results were a significant turnaround from the first six months of 2021, when Melbourne was the only CBD to record negative demand. According to the latest report, Melbourne posted the second strongest demand for CBD office space, just behind Perth.
“The business sector’s confidence in the future of the office and the property industry’s commitment to investing in and building new workspaces in the city shows there is a strong future for the CBD,” she said.
The increase in Melbourne CBD office vacancy was primarily due to an influx of new supply as an additional 185,332sqm of new office space came online. Future supply was also positive, with a total of 95,766sqm of new stock due to enter the market in 2022, followed by 174,225sqm in 2023 and 93,000sqm in 2024 and beyond.
“While these are positive signs, the recovery of our CBD won’t happen of its own accord. As case numbers come down, the Government should amend its current advice to allow businesses to make their arrangements with staff and get people back to the office if they wish,” Ms. Hunter said.
“We would also like to see the mask rule in the office relaxed, particularly given the current density quotients in place as this will encourage more people to return.
“People are the lifeblood of the CBD, and with 500,000 office workers coming to the city each day before the pandemic, reopening our offices and encouraging people to return will have a significant impact on our city.
“The property sector wants the Victorian Government to look beyond the pandemic and lead an aggressive strategy to attract national and global corporations to Melbourne as this investment plays a critical role in supporting jobs and driving economic activity,” she said.
Melbourne also saw a lift in its sublease vacancy rate in the CBD, increasing to 130,000sqm, more than double of any other CBD in the country.
“The cycle of lockdowns and working from home has shocked the confidence of many small-to-medium-sized businesses, and we’ve seen the rapid rise of subleasing vacancies as people stay away from the CBD and small business and retail suffers,” Ms. Hunter said.
“Only by moving beyond the work from home directions can our CBD hope to get its life back as workers return to their offices and supercharge Melbourne’s recovery in 2022,” she said.
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