Fitzroys Melbourne CBD Office Update - Q1 2026

MELBOURNE CBD OFFICE MARKET UPDATE MARCH 2026

Supply Melbourne’s CBD office market increased by 100,618

As at January 2026, A-Grade space accounted for half

square metres over the six months to January 2026, an

of all office space across the Melbourne CBD. Over the

all-time high. The CBD now comprises 5.28 million square

past 10 years, A-grade office stock has grown the most

metres, its size second only to the Sydney CBD of all office

with 486,063 square metres being delivered. In contrast,

markets in Australia. The Melbourne CBD office market

both C-Grade and D-Grade office stock have declined

is now projected to be Australia’s largest office market by

over the past decade as the flight to quality has led to the

2030.

withdrawal of several obsolete buildings.

While the size of Melbourne’s CBD office market increased

The Western precinct continues to hold the most office

through the year to January 2026, this was driven

space in the Melbourne CBD with 33% followed by the

by completion of refurbished stock rather than new

Docklands which comprises 1.2 million square metres

developments. Major refurbishments finalised were: 111

having increased by 57% over the past 10 years. Looking

Bourke Street (44,000 square metres), 800 Collins Street

forward, there are only six (6) new developments which

(28,650 square metres) and 85 Spring Street (10,377

are under construction or have begun siteworks. Looking

square metres). New development additions included:

ahead through to 2028, the pipeline of new supply is

Perri Group/Pellicano development at 17 Bennetts Lane

expected to deliver 175,000sqm of new office space across

and Golden Age’s strata office development at 130 Little

the Melbourne CBD, less than half the long-term average.

Collins Street.

With the constrained development pipeline, the location of new supply is relatively evenly spread being delivered in the Western, Docklands and Eastern precincts.

Melbourne CBD Office Supply by Grade

23% Grade Premium A Grade B Grade

1% 50%

6%

C Grade D Grade 20%

Source: Property Council of Australia

FITZROYS OFFICE MARKET REPORT | MARCH 2026

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Supply Melbourne CBD New Office Supply

square metres

400,000

Under Construction

Forecast

Completions

300,000

200,000

100,000

0

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Source: Property Council of Australia

Pre-commitments Pre-commitment levels for buildings under construction

Beyond offices currently under construction, there are

are lower compared to previous years with currently 34%

a number of projects at various stages of development

pre-leased. With development activity projected to remain

approval proposed for the Melbourne CBD including:

below average levels for the medium term, (adversely

Dexus's 60 Collins Street (42,182sqm), Charter Halls'

impacted by the elevated high vacancy rates and cost of

Stage 2 of 555 Collins Street (35,000sqm) and Walker

construction) pre-leasing activity is anticipated to increase,

Corporation’s twin tower office development at 707 Collins

as tenants are incentivised even further to commit to new

Street (140,000sqm) in Docklands.

developments prior to completion.

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FITZROYS OFFICE MARKET REPORT | MARCH 2026

SUPPLY CBD PROJECTS UNDER CONSTRUCTION Building Address

Developer

Major Tenant Commitments

Total NLA (sqm approx)

Target Completion Due

7 Spencer Street, Melbourne

Mirvac

Work Club, AECOM

45,000

Q1, 2026

51 Flinders Lane, Melbourne

GPT

WPP, FM & Koda Capital, Airtrunk

28,300

Q1, 2026

435 Bourke Street, Melbourne

Cbus

CBA, Baker & McKenzie, Hostplus

62,500

Q2, 2026

393 Swanston Street, Melbourne

Scape

12,000

Q2, 2027

26 Flinders Street, Melbourne

Time & Place

10,000

Q3, 2027

"Town Hall"25 Swanston Street, Melbourne

Lendlease

16,000

Q4, 2027

Source: Property Council of Australia/Fitzroys

FITZROYS OFFICE MARKET REPORT | MARCH 2026

Mail Exchange

4

99 William Street, Melbourne

5

FITZROYS OFFICE MARKET REPORT | MARCH 2026

136 Exhibition Street, Melbourne

Demand The Melbourne CBD office market recorded its strongest level of

Consequently, for the first time since January 2023, both

net absorption in the six months to January 2026 in four years

Premium and A-grade offices recorded positive net absorption

as tenants relocated into the CBD, capitalising on the attractive

over the six months to January 2026.

lease terms.

In the six months to January 2026, A-grade space outperformed

According to the PCA, the Melbourne CBD office market

all other grades in the Melbourne CBD with 42,532 square

recorded positive net absorption of 28,029 square metres in the

metres absorbed. Premium grade offices recorded positive

six months to January 2026, leading to a total of 29,475 square

net absorption over the six months to January 2026 with

metres absorbed over the whole 2025 calendar year.

7,471 square metres absorbed. In contrast during the same period, B-grade and C-grade offices both recorded negative

Melbourne CBD office tenant demand is showing clear, yet

net absorption, equating to negative net absorption of 21,974

uneven, signs of stabilisation as of early 2026, transitioning from

square metres.

a period of downsizing to a more settled "flight-to-quality" trend.

Demand is heavily concentrated on tenants seeking A & Premium grade office buildings. Tenants are prioritising modern work spaces with high-end amenities supporting productivity and advanced technology.

square metres

Melbourne CBD Net Absorption

100,000

Prime

Secondary

50,000

0

-50,000

-100,000

Source: Property Council of Australia

FITZROYS OFFICE MARKET REPORT | MARCH 2026

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Demand Victoria’s employment rate of increase is moderating,

Over the six months to January 2026, the Docklands

having increased by 60,600 new jobs over the year, lower

precinct recorded net absorption of 32,485 square metres

than the 112,000 jobs created in the previous 12-month

boosted by the Department of Defence’s relocation into

period. Despite this easing employment growth rate,

800 Collins Street, Docklands. Other precincts to record

Victoria’s unemployment rate remains at 4.2% as at

positive net absorption over the six months to January

January 2026, below the 20-year average of 5.2%. Looking

2026, were the Eastern and North Eastern precincts with

ahead, Victoria’s employment is projected to increase

16,389 square metres and 12,243 square metres absorbed

further through 2026, albeit in select industries.

respectively. In contrast, Flagstaff, Western and Spencer precincts all recorded negative net absorption over the six months to January 2026.

Annual Victorian Employment Change by Sector Health Care Hospitality Education Transport IT & Telco Professional Services Admin & Support Retail Utilities Mining Finance & Insurance Government Wholesale Construction Manufacturing -30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

Source: ABS / Fitzroys

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FITZROYS OFFICE MARKET REPORT | MARCH 2026

TENANT ENQUIRY Tenant enquiry levels (both in terms of size requirements

Tenant enquiry for Melbourne CBD office accommodation

and number of tenant briefs) rose to their highest levels in

remains historically diverse with demand led by

five years over 2025, underpinned by SME's seeking space

Professional Services (29%), followed by Finance &

up to 1,000 square metres. Tenant briefs seeking more

Insurance (21%) Retail Trade (12%) Government (9%), and

than 3,000 square metres also increased in 2025, reaching

IT & Telecommunications (6%). Other sectors active in the

their highest levels in 10 years boosted by the elevated

Melbourne CBD office market over the past 12 months

vacancy levels. For occupiers less than 400 square metres,

have been the Healthcare and Logistics sectors.

fitted space and spec suites continue to be preferred, as smaller occupiers increasingly value minimal upfront fitout costs and using rental abatement incentives as much as possible.

As hybrid workplaces evolve and companies better understand how offices will be used, tenant enquiry levels are expected to continue to gain momentum through 2026. Occupiers have improved insight into workplace

Demand remains elevated for Premium and A grade

attendance and space needs leading to greater confidence

space particularly in the Eastern and North Eastern

in planning for their office accommodation.

precincts, driven by proximity to public transport, quality amenities and buildings providing high sustainability targets. ESG credentials are now a core requirement for tenants, particularly for overseas based and Government enterprises.

99 William Street, Melbourne

FITZROYS OFFICE MARKET REPORT | MARCH 2026

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LEASING TRANSACTIONS CBD LEASING TRANSACTION SNAPSHOT Address

Grade

Tenant

NLA (sqm)

570 Bourke Street, Melbourne

A

Brennan IT

1,100

120 Collins Street, Melbourne

Premium

Clayton Utz

7,800

161 Collins Street, Melbourne

Premium

APA Group

4,000

271 Collins Street, Melbourne

A|B

Bendigo Bank

1,100

530 Collins Street, Melbourne

A

Equity Trustees

2,517

555 Collins Street, Melbourne

Premium

Holman Fenwick

2,300

8 Exhibition Street, Melbourne

A

Insignia

8,400

51 Flinders Lane, Melbourne

A

FM Global

2,025

51 Flinders Lane, Melbourne

A

AirTrunk

1,945

51 Flinders Lane, Melbourne

A

Koda Capital

600

469 La Trobe Street, Melbourne

A

Rightside Legal

752

469 La Trobe Street, Melbourne

A

Foodbank

578

485 La Trobe Street, Melbourne

A

Coulter Legal

475

533 Lt Lonsdale Street, Melbourne

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FITZROYS OFFICE MARKET REPORT | MARCH 2026

Vacancy The vacancy rate of the Melbourne CBD office market rose

Overall, the total Australian CBD office vacancy rate increased to

slightly to 19.0% over the six months to January 2026, driven by

14.8% as at January 2026, the highest rate since 1995. Outside of

the reintroduction of several fully refurbished office buildings

the CBD office markets, the overall vacancy rate of the Australian

including (eg: 226 Flinders Lane, 419 Flinders Lane, 800 Collins

non-CBD office markets remained at 18.5%, its highest rate since

Street, 85 Spring Street & 111 Bourke Street). According to

1993.

the Property Council, the total Melbourne CBD office vacancy

The vacancy rate of the St Kilda Road office market rose to

rate has now risen to its highest rate since January 1997. In

an all-time high of 31.6% in January 2026, while the vacancy

comparison Sydney’s CBD vacancy rate is now sitting at 13.8%

rate in the Southbank office market fell to 15.0% with

and Brisbane at 11.8%. Elsewhere, the office vacancy rate fell in

vacancy rising to a three-year high in the East Melbourne

Perth, and Canberra in the six months to January 2026.

Fringe Market

office market at 10.1%.

January 2026

July 2025

Stock (sqm)

Vacancy Rate

Vacancy Rate

St Kilda Road

589,868

31.6%

29.1%

Southbank

416,232

15.0%

16.7%

East Melbourne

182,472

10.1%

7.5%

Source: Property Council of Australia

FITZROYS OFFICE MARKET REPORT | MARCH 2026

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Vacancy VACANCY BY GRADE Despite the trend of tenants to upgrade their office

vacancy rate sitting at 15.8%, almost double its 10-year average.

accommodation, the vacancy rate of A-grade offices increased

Meanwhile, B-grade and C-grade offices vacancies increased to

to 20.6%, its highest rate since 1994 with the Premium office

20.5% and 13.8% respectively.

Melbourne CBD Vacancy by Grade

total vacancy

24%

Premium

A-Grade

B-Grade

C-Grade

D-Grade

Total

16%

8%

0%

Source: Property Council of Australia

SUB-LEASE VACANCY The sub-lease vacancy rate of the Melbourne CBD office

Most precincts are now under 1.5%, with the North Eastern

market appears to be stabilising having trended down

precinct still recording the highest level of sub-lease space

since 2022. As at January 2026, sub-lease vacancy totalled

with more than 23,100 square metres, accounting for

64,004 square metres however, still remains above its 10-

36% of the Melbourne CBD office market’s total sub-lease

year average, resulting in a sub-lease vacancy rate of 1.2%.

vacancy.

Collectively, Premium and A-grade office space account for 94% of total sub-lease vacancy across the Melbourne CBD office market as at January 2026.

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FITZROYS OFFICE MARKET REPORT | MARCH 2026

Vacancy by Precinct Across Melbourne’s CBD office market, by precinct, there were

the vacancy rates of the Eastern, Flagstaff, Spencer and Western

mixed results in the six months to January 2026. The Civic,

precincts increased over the six months to January 2026, sitting

Docklands and North Eastern precincts recorded decreases in

at 20-year high's. Collectively, the Western and Docklands

their vacancy rates in the six months to January 2026. In contrast,

precincts account for 59% of the Melbourne CBD office market.

Vacancy Rate Per Precinct

7%

Precincts

6%

Western Civic

8% 33%

Docklands Eastern Flagstaff

12%

North Eastern Spencer 8% 26%

Source: Property Council of Australia

Outlook Although tenant enquiry levels have increased, the total

competitive encouraging more tenants to relocate into

vacancy rate of the Melbourne CBD office market is

the CBD. Tenants are attracted to the CBD due to the

likely to remain elevated through 2026. As a result of the

premier amenity and connectivity boosted recently with the

elevated vacancy rate, leasing terms will remain highly

completion of the Metro Tunnel.

FITZROYS OFFICE MARKET REPORT | MARCH 2026

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Vacancy projection

total vacancy

Melbourne CBD Vacancy Projection

25.0%

Forecast 20.0%

15.0%

10.0%

5.0%

Source: Property Council of Australia / Fitzroys 0.0%

Source: Property Council of Australia / Fitzroys

Rents & Incentives Gross face rents continue to increase, albeit marginally

Looking ahead, prime Melbourne CBD offices are

as outgoings and incentives rise. While incentive levels

projected to record net effective rental growth from early

remain at historical highs due to the elevated vacancy

2027 as incentive levels begin to finally ease. Rental growth

rate, there is increasing variability with incentive levels

for secondary offices will stay subdued until the vacancy

depending upon the availability of contiguous prime

rates peak, as tenants remain very selective.

floors. Incentives are projected to remain at their relatively high levels throughout this year.

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FITZROYS OFFICE MARKET REPORT | MARCH 2026

RENTAL PROJECTION $/square metre

Melbourne CBD Office Net Face Rents

$750

Prime

B-Grade

$650

$550

$450

$350

$250

Source: Fitzroys

Source: Fitzroys

Mail Exchange

FITZROYS OFFICE MARKET REPORT | MARCH 2026

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Office Leasing Success

Mail Exchange 696 Bourke Street Melbourne

99 William Street Melbourne

136 Exhibition Street Melbourne

Dover House 6 Fitzgibbon Street Cremorne

New Listing

New Listing

New Listing

New Listing

411 Collins Street Melbourne

North Tower 271 Collins Street, Melbourne

525 Flinders Street Melbourne

90 Collins Street Melbourne

New Listing

Area Leased: 4,400sqm

Area Leased: 1,500sqm

Area Leased: 1,000sqm

141 Capel Street North Melbourne

126 Trennery Crescent Abbotsford

88 Ricketts Road Mount Waverley

3 Cubitt Street Cremorne

Area Leased: 1,500sqm

Area Leased: 1,000sqm

Area Leased: 2,000sqm

Area Leased: 400sqm

OFFICE Leasing Team

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Phillip Cullity Director 0419 322 825 cullityp@fitzroys.com.au

Stephen Land Associate Director 0400 950 290 lands@fitzroys.com.au

Hamish Dennis Manager 0406 500 232 dennish@fitzroys.com.au

Sam Flockart Analyst 0499 047 997 flockarts@fitzroys.com.au

FITZROYS OFFICE MARKET REPORT | MARCH 2026

Disclaimer: The information, views, projections or analysis published in this report including text, graphics, and all images are for general use only and not to be relied upon for financial or related investment in any way. No responsibility or liability whatsoever can be accepted by Fitzroys Pty Ltd for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. Reproduction of any part or whole of this report must seek prior express written approval of Fitzroys Pty Ltd.

FITZROYS OFFICE MARKET REPORT | MARCH 2026

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