All signs pointing towards improvements in Melbourne’s office fundamentals

Melbourne’s office market is poised for a favourable investment cycle, fuelled by elevated demand and a constrained supply environment that will strengthen office fundamentals in the years ahead.

CBRE’s new Why Melbourne report highlights that migration and occupier expansionary activity are the two key areas primed to elevate Melbourne’s demand levels. 

Australia’s migration levels have reached historic highs, and this trend is forecast to continue, with elevated migration expected for the remainder of the decade.

CBRE Senior Research Analyst Cameron Douglas-Perrine expects Melbourne's relative affordability and livability to drive growth from net overseas and interstate migration into Victoria, supporting Melbourne’s office fundamentals. 

“Large occupier activity across Melbourne’s CBD has been mostly contractionary post-pandemic. We expect a reversion of this trend,” Mr Douglas-Perrine said. 

“We believe tenant right-sizing is beginning to stabilise across Melbourne's CBD. With a healthy economic outlook, coupled with strong migration prospects, Melbourne's office market is primed to see strong net absorption levels supporting continued rental growth.”

Investment in Melbourne’s office market during 2024 is strategically timed, driven by a convergence of fundamentals. The research indicates that Melbourne is set to replicate several previous cycles.

CBRE Capital Markets Senior Director, Kiran Pillai said, “At the forefront is Melbourne’s office supply. Local conditions highlight supply is set be subdued in the short term. From 2027 onwards, given current feasibility and lending conditions, expectations are that limited to no supply will enter the market.” 

“These conditions drive our perspective that incentives are set to decline, vacancy is peaking, and current capital values represent a once in a cycle buying opportunity.”