The latest market data also corresponds with new JLL research confirming annual Victorian office transactions have fallen by more than 62 per cent since the start of 2024, declining from a decade-long average of $3.4 billion per annum to just $1.28 billion per annum.
Global investors have traditionally been a major source of capital for Victoria's office market, accounting for almost one in every two dollars (47 per cent) invested in office transactions over the decade to December 2023. Since 1 January 2024, their share has halved to around 25 per cent on average, with no foreign buyers recorded in the six months to June 2026.
Property Council Victorian Executive Director Cath Evans said while the results have stopped deteriorating, Victoria needs policy settings that encourage investment and business confidence.
"The stabilising of office vacancy is welcome, but Melbourne still has Australia's highest vacancy rate by a long way. More must be done to support investment attraction to Victoria," Ms Evans said.
"Melbourne has absorbed more than 76,000 square metres of new office space while still recording stable vacancy numbers. That demonstrates businesses continue to invest in high-quality workplaces that help attract and retain talent, foster collaboration and support productivity."
"However, this recovery is occurring against a backdrop of ongoing uncertainty. We're hearing from businesses that the proposed Work from Home legislation is contributing to delays in tenancy decisions and a more cautious approach to future office space requirements."
"At a time when Melbourne is working to restore business confidence and revitalise the CBD, government policy should be supporting employers to make long-term investment decisions."
"We need to remove barriers to investment, like the Absentee Owner Surcharge, to help restore Melbourne's competitiveness, attract global capital and accelerate our office market recovery."
Demand was particularly strong for prime workplaces, with A-grade offices recording positive net absorption of more than 53,000 square metres over the period.
The report also points to continued confidence in Melbourne's long-term growth, with additional office supply set to enter the market over the coming years.
Around 62,500 square metres of new office space is expected to be completed in the second half of 2026, followed by more than 29,000 square metres returning to the market through major refurbishments in 2027.
"A vibrant CBD underpins jobs, productivity and economic growth," Ms Evans said.
"Victoria needs policy settings that encourage investment, support business confidence and make Melbourne the best place to do business."
