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New research warns Victoria’s proposed work-from-home legislation could strip $830 million annually from Melbourne’s office market, with vacancy rates already at record highs.
Buyersagent.com.au has flagged serious financial risks for commercial property owners if the state government proceeds with plans to mandate two remote work days per week.
Melbourne’s CBD vacancy rate sits at 18 per cent – the highest in the country and 6 percentage points above Sydney.
Buyersagent.com.au CEO, Shaun McGowan, said the proposed legislation will force behavioural shifts across the market, encouraging businesses to reduce their footprint.
“The WFH plan as it stands could create a two-tier market where only premium office space thrives, with the reduction in demand hitting rental prices in the second tier and further dropping the potential income of property investors,” he said.
He advised investors to prioritise premium-grade assets and steer clear of oversupplied secondary stock.
It comes after the Property Council of Australia revealed that office vacancy rates have risen as tenants pursue higher-quality work spaces.
Over 200,000 square metres of premium office space have entered the market throughout the same period, outpacing demand and contributing to the rise in vacancies.
While tenants flocked to premium office spaces with a 2.7 per cent increase in demand, lower-tier office stock recorded declines as occupied spaces fell across B-, C- and D-grade buildings.
The council expects the trend to continue, with 131,697 square metres of new space set to launch in the next six months.
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