Melbourne Fringe & Suburban Q1 2025

Key Points:

•  Leasing demand was mixed over H2 2024 with Southbank & St Kilda Road recording 6-month absorption of +636sqm and -6,702sqm respectively.  
• The office development pipeline remains empty for Southbank and St Kilda Road. Development activity in Melbourne’s City Fringe and Inner East remains modest, with c.25,000sqm of completions anticipated in 2025 & 2026. More than 60% of future metro supply consists of projects in the development application phase, awaiting construction.
• Vacancy for prime assets remains below secondary grade stock as of H2 2024 across both precincts. Total vacancy in Southbank saw a moderate decrease of -102bps over the last 6-months, attributed partly to negative net supply.
• Face rents across the fringe saw strong growth in Q1 2025, with the City Fringe and Inner East being clear outperformers. Incentives experienced mild mixed movement across the fringe and suburban market as pressures from prime CBD incentives increase.
• Investment activity in Melbourne’s Fringe and Metro markets saw subdued performance in Q1 2025, with $67m in fringe and suburban assets transacting over the quarter. Yields continue to see expansion albeit at a decelerating pace.