Overall office vacancy in Melbourne rose to 19% in January 2026, up from 17.9% in July 2025. Prime office vacancy now sits at 19.1%, while secondary office buildings recorded a vacancy rate of 18.5%.

Nationally, office vacancy increased to 15.9% over the same period, up from 15.2%.

Despite the higher vacancy levels, both supply and demand for office space in Melbourne have increased over the past six months, pointing to potential green shoots for the sector.

The city recorded 100,000 square metres of new office space supply in the second half of last year, well above the historical average. This surge in supply has been a key driver of the higher vacancy rate.

At the same time, demand rebounded to 28,000sqm, a significant turnaround from negative demand of 45,000sqm recorded during the same period last year.

Property Council Victorian Executive Director Cath Evans says the strong additions to office supply reflected confidence in Melbourne’s long-term prospects.

“The recent and impending addition of several major top quality office projects in Melbourne is a projection of long-term faith and anticipated demand for premium, well located office space,” Evans says.

“Overall, Melbourne remains an attractive destination for employers, and the increase in supply presents a real opportunity for tenants who are able to capitalise on renewed interest in the market.”

However, Evans says concerns remained about Melbourne’s persistently high vacancy rate.

“At the same time, we remain concerned that Melbourne still has the highest office vacancy rate in Australia,” she says.

“While this current office supply cycle will end in the next 12 months, it’s crucial we continue to attract investment to upgrade older office buildings to meet tenant expectations and sustainability benchmarks.

“The property sector in Melbourne has been battling harsh economic headwinds and a succession of new and increased taxes for years.

“Combine this with the uncertainty about the Victorian Government’s unprecedented and looming intervention to mandate the right to work from home, and it means too many investors are saying no to Melbourne.

“It’s vital that we make changes that unlock new private investment, especially from global sources, into rejuvenating office assets that will enhance the overall vitality of central Melbourne.”

Evans says the Property Council would soon release its state election platform, focused on meaningful tax reform and reducing red tape.

“The Victorian property industry stands ready to work with the next government to restore confidence, unlock investment and help deliver Victoria’s future prosperity.”

Image: Naarm skyline / wirestock on Envato

Clémence Carayol

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