Melbourne’s office buildings are still struggling to get anywhere close to pre-pandemic occupancy levels.

Two-thirds of Melbourne offices unoccupied, Sydney less than half full

Larry Schlesinger|Feb 09, 2021

Melbourne CBD office towers were more two-thirds empty at the end of January while those in Sydney were more than half vacant, as many employees remained at home despite being allowed or encouraged to return to work, new figures show.

Melbourne’s occupancy more than doubled to 31 per cent at the end of January, from 13 per cent in December, according to the latest survey of commercial landlords by the Property Council.

However, this was well below the new 50 per cent threshold permitted (up from 25 per cent) which took effect in Victoria on January 18. The survey was run from 27 January to 4 February.

In Sydney, the occupancy rate was stubbornly unchanged at 45 per cent, with return-to-work hampered by a three-week lockdown on the Northern Beaches following a COVID outbreak.

Sydney’s occupancy rate has only gone on up incrementally since hitting 40 per cent in October. Pre-COVID, Sydney and Melbourne had occupancy rates of 94 per cent.

All the other major capital city CBDs had office occupancy rates between 60 and 70 per cent, led by Adelaide and Canberra.

Perth was the only market where the occupancy rate fell between December and the end of January (from 77 per cent to 66 per cent) ahead of a five-day lockdown to prevent a fresh outbreak.

Michael Cook, group executive of property at Investa, one of the country’s biggest private office landlords, said occupancy across its portfolio was “slowing improving”.

“The Property Council data shows that office occupancy is improving on the back of an easing in COVID-related barriers, such as government restrictions and concerns about the health and safety of public transport,” said Investa’s general manager of research and strategy David Cannington.

“All office markets are also reflecting a trend increase in occupancy in recent months as sentiment continues to support a ‘return to the office’ and a greater appreciation for the benefits of office-based work,”

Property Council boss Ken Morrison said the survey results were a positive sign for Australia’s economic recovery but there was still more progress needed.

“As we start the new year it is encouraging to see so many CBD workers coming back to their offices to enjoy the benefits of face-to-face connections and collaboration,” he said.

“While we have a long way to go to get back to pre-COVID levels, increased CBD occupancy is a godsend for the thousands of businesses that rely on bustling city centres to survive.

Sydney’s actual vacancy rate (based on unleased space) hit a seven-year high of 8.6 per cent at the end of January, according to the Property Council’s Office Market report, while Melbourne’s surged to 8.2 per cent.

A separate JLL report found significantly higher vacancy rates across the country’s two biggest office markets, with Sydney hitting 11.9 per cent and Melbourne 13.3 per cent in the December quarter.