Melbourne Commercial Property Market

Melbourne CBD office vacancy reached 19% in early 2026, the highest among Australian capital cities and the highest level since 1997. The driver is a supply and demand mismatch rather than economic weakness. Melbourne delivered a significant volume of new premium office stock between 2022 and 2025, while Victorian Government work-from-home policies softened sustained tenant demand for traditional office space.

Importantly, that 19% headline figure conceals a sharp split. Eastern Core prime A-grade towers along Collins and Bourke streets are leasing actively. Secondary CBD stock and Docklands towers carry the bulk of the vacancy. For commercial property finance, lenders now treat these as fundamentally different propositions. We see this distinction priced directly into LVR offers. For market context across Australia, the Property Council Office Market Report publishes the official vacancy data twice yearly.

Each market is at a different point in the cycle. Sydney CBD office vacancy sits substantially lower than Melbourne, with prime stock seeing genuine yield compression and rent growth. Brisbane is being driven by 2032 Olympics infrastructure and a much tighter office market. Melbourne is the recovery story with the longest runway, particularly for buyers prepared to look at city fringe and South East industrial rather than CBD office.

For investors, that recovery position can be an advantage. Melbourne is the only major capital where prime CBD office is still genuinely attractively priced relative to fundamentals, and it is the only market where a clear bifurcation between prime and secondary stock creates obvious selective opportunities. Read our Sydney market page and Brisbane market page for direct comparisons.

The Metro Tunnel opened in 2025 and represents the largest infrastructure investment in Victoria's history at $11 billion. Five new underground stations connect the Sunbury and Cranbourne/Pakenham lines through the CBD. The commercial property impact is concentrated around the new station precincts: Arden in North Melbourne, Parkville, CBD North, CBD South and Domain.

For commercial property buyers and investors, the Metro Tunnel reinforces the long-term value case for inner-north precincts including Brunswick, Preston and Coburg, and for the city fringe office corridor through Cremorne and Richmond. We see lender appetite reflecting this improved accessibility narrative. The Arden Urban Renewal Precinct is the highest-profile development opportunity directly linked to a new Metro Tunnel station.

Melbourne is the Australian commercial market where the gap between vendor expectations and lender valuations is most pronounced, particularly in the office sector. With 19% CBD vacancy and significant secondary stock under pressure, valuers are applying caution to anything that is not prime A-grade product in established precincts. The result: valuations routinely come in short of contract price on secondary CBD office and Docklands assets.

This is why we always recommend understanding the valuation environment for your specific asset type and precinct before signing a contract, not after. Our Valuation Watch section on this page identifies the asset categories where valuation risk is highest, and where it is lowest. For loans where valuation considerations affect deposit requirements, see our Melbourne commercial property loans page.

Cremorne, alongside Richmond, has emerged as Melbourne's best-performing office sub-market. Cremorne vacancy sits around 3.8% against a 19% CBD figure, and Knight Frank named Cremorne one of Australia's top five office hotspots for 2026. Rent growth in Cremorne is outpacing the CBD by a meaningful margin.

The drivers are structural rather than cyclical. Technology, creative and professional services tenants prefer the city fringe environment. The supply pipeline is genuinely constrained because suitable land is limited. Heritage building stock prevents large speculative office tower deliveries that have weighed on the CBD. From a finance perspective, we see lender confidence in Cremorne and Richmond materially higher than 18 months ago. Our precinct breakdown has the full sub-market view.

The 4% threshold is the conventional industrial market equilibrium point. Below 4%, conditions favour landlords and owner-occupiers. Above 4%, conditions favour tenants. Melbourne's South East industrial corridor (Dandenong, Clayton, Moorabbin and Braeside) at approximately 3.5% sits significantly tighter than the Melbourne average of 4.7%, and is one of the tightest established industrial sub-markets on the east coast.

For commercial property buyers, this means strong rental income security on investment assets, genuine competition between owner-occupiers driving values, and limited speculative supply in the pipeline maintaining the tight conditions. From a finance perspective, we consistently see the cleanest credit outcomes of any Melbourne precinct in this corridor. To explore your borrowing capacity, try our commercial property borrowing capacity calculator.

Yes, but with careful asset selection. The West Melbourne industrial corridor (Laverton, Truganina, Derrimut and Altona) saw significant speculative supply complete during 2024 and 2025, which pushed precinct vacancy to around 5.3% at the end of 2025. CBRE forecasts vacancy will tighten from 2026 as the new pipeline slows, supporting medium-term recovery.

The bifurcation we observe is sharp. Owner-occupier demand from manufacturing, e-commerce fulfilment and food processing operators in the West remains strong, and these transactions process consistently well. Investment product is more demanding. Lease covenant strength and remaining WALE matter considerably more than they did 18 months ago, and lenders apply that scrutiny directly to LVR decisions. The West Gate Tunnel completion in 2025 to 2026 is a medium-term tailwind for freight efficiency in this precinct.

Three sectors stand out for SMSF activity in Melbourne right now. Suburban medical and allied health assets across Brunswick, Preston, Moorabbin and South Melbourne offer defensive income, CPI-linked lease structures, and consistent valuer support. Professional services strata in Inner North precincts offer similar reliability with strong owner-occupier demand. Industrial owner-occupier purchases in the South East corridor at the $1M to $4M range are also processing well for SMSF buyers.

The common pattern in all three is asset-level fundamentals that lenders and valuers respond to confidently: genuine commercial use, established tenancy patterns, strong comparable sales evidence in the precinct. To estimate your SMSF borrowing capacity, use our SMSF borrowing capacity calculator. For SMSF property loan information, see our SMSF commercial property loans resource.

The honest answer depends on what you are buying and where. The buying window is genuinely open for some Melbourne commercial property categories and genuinely closed for others. Prime CBD office, well-located city fringe assets and South East industrial are categories where we see real activity, supportive valuations and competitive lender appetite right now. Knight Frank has been explicit that pricing in prime CBD office may not stay attractive much longer as supply tightens from 2027.

Conversely, secondary CBD office and Docklands stock remain genuinely difficult for most buyers. Mixed-use strata at residential-commercial boundaries demands specialist lender matching. The general principle in Melbourne 2026: do not buy on headline market noise, buy on precinct and asset specifics. Browse our resource library for sector-specific guides, or contact us for a specialist Melbourne consultation.

"Selective" describes a market where lenders are still active and willing to lend, but with materially tighter criteria than they would apply in a "strong" or "improving" market. Practically, that means a smaller pool of lenders who will consider the asset class, tighter LVR caps applied even where lenders do participate, more rigorous tenant covenant and lease term scrutiny on investment product, and longer credit assessment timelines.

Selective markets are not closed markets. Well-located assets with strong fundamentals still get done. The difference is that lender selection becomes the critical variable, not just the asset itself. This is precisely where specialist commercial finance brokerage adds value. Wrong lender on a selective market deal can mean a decline that a different lender would have approved. For more on how we work through selective lender environments, see our about page.

The pipeline is tightening across most Melbourne commercial property segments, which is a structural tailwind for buyers acting now. Industrial speculative supply that drove West Melbourne vacancy elevation has largely worked through, with CBRE forecasting vacancy stabilisation from 2026. CBD office: no significant new prime stock is scheduled beyond what is already delivering, which is why Knight Frank has flagged 2027 as a turning point for prime pricing.

For city fringe and South East industrial, the pipeline has always been structurally constrained by limited suitable land. These precincts will not see meaningful new supply pressure even if demand softens. The infrastructure pipeline (West Gate Tunnel, North East Link from 2028, Suburban Rail Loop from 2035) will continue reinforcing precinct accessibility and demand fundamentals across these established corridors. Our development pipeline section tracks the major projects shaping this outlook.

The most common mistake we see is buyers treating Melbourne as a single market when it is genuinely fragmented across precincts and asset categories. A "Melbourne commercial property" decision based on the 19% CBD vacancy headline misses the fact that South East industrial sits at 3.5%, Cremorne office is around 3.8%, and suburban medical is performing strongly across multiple sub-markets. The headline number is real, but it is not the whole picture.

The second most common mistake is signing a contract before testing the valuation environment. In Melbourne 2026, valuation shortfall is a meaningful risk for several asset categories, and the best time to surface that risk is during due diligence rather than post-contract. We always recommend an early conversation with a specialist commercial finance broker who works the Melbourne market regularly. Speak to Nadine Connell directly through our contact page.