The Property Council's July 2025 edition of the Office Market Report shows that Melbourne's CBD is proving itself as a destination of choice for office tenants.
There has been a 0.1 per cent decrease in office vacancy levels compared to January this year, a drop from 18 per cent to 17.9 per cent. This contrasts with the national trend that saw national office vacancy climb 0.5 per cent in the same period.
Property Council Victorian Executive Director Cath Evans said that with this indicator of stability, now is not the time for the Victorian Government to introduce a private sector working from home mandate, which could shake confidence in Victoria's commercial viability.
"At a time when many other major cities are recording increases in office vacancy, it's encouraging to see that Melbourne's office market showing green shoots," she said.
"However, the Victorian Government's recent announcements around legislating working from home arrangements are deeply concerning and risks undermining confidence not just in the office sector, but to our broader pipeline of private sector investment.
"Flexibility is and will remain core to many workplaces. But decisions about working arrangements should remain a matter between employers and their teams – not mandated by government. The reality is that investment to drive jobs, upgrade our office assets and keep our city vibrant will be deterred from Melbourne if this latest policy comes into effect.
Melbourne has the strongest supply pipeline nationally, with over 300,000 sqm of new office space planned between 2025 and 2027, with major new projects including 800 Collins St, 7 Spencer St and 435 Bourke St.
Ms Evans said these strong pipeline figures show Victoria is leading nationally when it comes to shaping the next phase of office development.
"We now need the Victorian Government to meet us at the table when it comes to decisions that will mould our CBD and keep us open for business on a global scale."
The report also highlighted an increase in demand for B Grade buildings, which has historically been lower than demand for A Grade, indicating a desire for affordability and flexibility in leasing decisions.
The report shows a decrease in sublease vacancy, suggesting increasing tenant confidence in determining their requirements.
"There's no doubt that Melbourne is key to the future success of Australia's evolving office market," Ms Evans said.
"However, there is still work to be done to ensure future long-term supply. This must include an easing of our nation-worst foreign investment taxes and surcharges that are deterring the further investment we need in both existing and new office buildings."
