Trump role in Melbourne CBD office market's suburb-sized hole
Commercial real estate firm JLL research shows the city recorded its second straight quarterly improvement in increasing office space take up in the past quarter, with 11,900sq m more space filled at the end of June than at the end of March.
They've estimated rising demand chewed through 50,000sq m of vacant office buildings across the first half of 2025, dragging the CBD's total office vacancy rate back below more than a million square metres, where it peaked late last year.
Annabel McFarlane, Head of Strategic Research at JLL calculated that without any major changes to the available supply of office space, about 385,870sq m of it, an area bigger than the Botanic Gardens, still needed to be filled in order to recover to its 10-year average vacancy rate of 11.2 per cent.
Currently, about 18.2 per cent of the city's office space, or 983,830sq m is empty — bigger than some suburbs, including Ripponlea and Gardenvale, and close to the size of Cremorne and Deepdene.
'However, we are already seeing the best assets and locations start to fill up,' Ms McFarlane said.
'Melbourne's CBD prime net effective rental growth returned to positive in the second quarter of 2025 and secondary net effective rents have stabilised.'
If the city continued to fill another 50,000sq m of office space every six months, it would take most of four years to get back to its pre-pandemic self.
However, JLL joint head of leasing advisory Nick Drake said it was likely to be faster than this, with rising population driving increased demand for space in the CBD — as well as a trend of head offices for major firms heading to the city from the suburbs this year, including Coles, home builder Simonds and logistics firm Toll Group.
'Melbourne's demand factors are stronger than a lot of the rest of the country, and it's affordable compared to other cities,' Mr Drake said.
'There will also be some buildings that will be converted to other uses. And there's some sites that have just been shelved for now as development is hard to stack up, so we won't see a lot more coming up for the rest of the decade.'
He added that there could also be significant boosts to leasing activity as fallout from US President Donald Trump's tariff policies settles in the coming months, with the confidence boost that stability would bring potentially enough to fill another MCG or two of CBD office space.
With the past quarter's office uptake softer than the first three months of the year, Mr Drake noted many businesses were looking but not committing to leases amid the fallout of Trump's announcements.
Another major change of direction could come if more businesses set return to office mandates, with a growing share of CBD-based firms now requiring their staff to attend the building at least three days a week.
Melbourne became the most locked-down city in the world during the Covid-19 pandemic, and its office workers have been among the slowest in the nation to return to their buildings.
That lack of staff returning has led to a number of large operators downsizing office spaces in the city's centre, and to it having the highest vacancy rate in the nation.
By contrast to the Victorian capitals more than 18 per cent vacancy rate in June, less than 10 per cent of Brisbane's office space is currently seeking a tenant.
And while Melbourne's June quarter office space absorption covered 11,900sq m, the figure in Sydney was 23,500.
Further positives in the JLL market analysis included a 1.4 per cent increase in rents over the past three months.
There is also rising strength in the city's most popular destinations, with the east end of Collins St, also known as the Paris end of the popular strip, now becoming difficult for firms to find any space in.
Demand is also up at the west end of Collins, and improving in Docklands, but relatively flat around most other parts of the CBD.
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