Why Melbourne Office

2024 represents an opportune time to invest in Melbourne’s office market. Driven by a range of fundamental and cyclical factors, our latest report ‘Why Melbourne Office’ explores the current investment prospects of the market, answering the question “Why Melbourne?”.

Affordability & Migration

• Key data suggests Melbourne offers one of the strongest affordability and livability prospects of major states, whilst being a key hub for Australian employment.
• Given our analysis of white collar worker preferences, we believe Melbourne is primed to see elevated migration (both interstate and overseas) creating an estimated 10% average additional net absorption per year above current forecasts.

Occupier preferences & expansionary activity

• Our vacancy analysis highlights a growing bifurcation between two subsets of prime assets driven by evolved preferences.
• As tenant right-sizing stabilizes, Melbourne’s office market, offering the lowest average rents in the eastern seaboard makes it well positioned for occupiers looking to expand or relocate to capitalize off strong economic growth prospects.
• Our data suggests there is 10-13% vacancy differential in Melbourne’s CBD for large occupiers with key requirements. We expect the current limited availability conditions to drive strong rental growth in existing assets.

Opportune Timing:

• Our analysis of prior cash rate cycles reaffirm our house view that cash rates will begin declining over H2 2024, bringing with it downward pressure on yields across Melbourne’s office market.
• Elevated construction costs and economic rents confirm our belief that supply conditions across Melbourne will likely remain subdued in the short-to-medium term beyond existing developments under construction. 
• Incentives across Melbourne are set to follow a prior cycle, a product of subdued supply conditions, reaffirming our belief that incentives will peak by the end of 2024 followed by a gradual decline.