Overview
Melbourne covers just 3% of Australia’s land mass but contributes nearly a quarter of the country’s GDP. With a population of over 5.3 million and strong growth projections, it continues to be one of the fastest-growing cities. Key infrastructure projects, such as the Metro Tunnel and Melbourne Airport’s third runway, are set to further enhance connectivity and support ongoing economic growth. Melbourne remains a central hub for industries like mining, energy, and business services. Five of the top 10, and 36 of the top 100 Australian companies have their headquarters in Melbourne.
Office
In Q4 2024, Melbourne’s CBD office market saw a vacancy rate of 19.8%, remaining steady despite a slight negative net absorption of -1,800 sqm. Larger tenant segments took up around 1,300 sqm of space. Prime net effective rents showed a small decline of 0.5% quarter-on-quarter, but remained positive at +1.8% year-on-year.
No new office developments were completed in Q4 2024, with total new supply for the year at 79,000 sqm—well below the 5-year average. Looking forward, limited new supply is expected in 2025, with vacancy rates likely to tighten gradually as economic conditions improve.
Industrial
In Q4 2024, Melbourne’s industrial vacancy rate rose to 3.6%, driven by an increase in new supply, with approx. 300,000 sqm of space delivered—significantly above the 10-year average. Despite the higher supply, leasing activity remained steady, particularly in the Western precinct, where demand was driven by manufacturing and warehousing sectors.
Prime net face rents averaged $145/sqm at the end of Q4, reflecting an approx. 7% increase year-on-year, though incentives played a role in moderating effective rental growth.
Looking ahead, the supply pipeline for 2025 is expected to remain strong, with around 40% of new space already pre-committed. Vacancy rates may either stabilise or tighten gradually as demand remains consistent.
Retail
In Q4 2024, Melbourne’s retail market showed improvement, with retail turnover up by 2.0%, supported by key sales events. Vacancy rates in the CBD decreased to 6.0%, the lowest among major Australian cities, reflecting a recovery in leasing demand. Prime retail strips in the metropolitan area saw vacancy rates drop to 9%, though areas like Fitzroy Street recorded higher vacancy levels of 15%.
Looking ahead, Melbourne is set to see around 270,000 sqm of new retail space delivered between 2025 and 2026, which could impact vacancy rates and leasing activity in the coming years.
