Melbourne Commercial Property Market

Melbourne CBD office vacancy was 18.9 per cent in the six months to July 2026, down marginally from 19 per cent in January but still the highest of any Australian capital. 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 2026, while uncertainty over Victoria's proposed work-from-home laws has weighed on business and investor confidence in city office space.

Importantly, that 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. 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 is 13.3 per cent and falling, with prime stock seeing solid rent growth. Brisbane, at 10.2 per cent, has the tightest office market of the three, driven by population growth and 2032 Olympics infrastructure. Melbourne, at 18.9 per cent, 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. With prime CBD yields at their highest since 2013, Melbourne is where prime office is priced most attractively relative to its long-run fundamentals, and the 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 November 2025, with full services running from February 2026, at a cost of more than $12.8 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, State Library (CBD North), Town Hall (CBD South) and Anzac (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 18.9 per cent CBD vacancy, and four rate rises this year pushing yields out, 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 far below the 18.9 per cent 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.

Around 4 per cent is the conventional industrial market equilibrium point. Below it, conditions favour landlords and owner-occupiers; above it, they shift towards tenants. Melbourne's South East industrial corridor (Dandenong, Clayton, Moorabbin and Braeside) sits at about 4.1 per cent on Knight Frank's Q2 2026 numbers, tighter than the Melbourne average of 4.7 per cent, and has recorded the strongest prime rent growth in Melbourne over the past year, up more than 9 per cent.

For commercial property buyers, this means solid rental income security on investment assets, genuine competition between owner-occupiers supporting values, and limited speculative supply in the pipeline. Rate rises have nudged yields out here too, but rent growth has cushioned values. 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) has absorbed significant speculative supply since 2024, which has pushed precinct vacancy to around 5.7 per cent on Knight Frank's Q2 2026 numbers. CBRE expects industrial vacancy nationally to peak in the second half of 2026 and trend lower from 2027 as new supply slows, which supports a 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 a year ago, and lenders apply that scrutiny directly to LVR decisions. The West Gate Tunnel, open since December 2025, 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. With rate rises tightening serviceability, the rent the property earns matters more than ever for an SMSF loan. 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. With prime CBD yields above 7 per cent and only three new towers completing by the end of 2026, with nothing under construction after that, Knight Frank sees prime pricing as attractive for patient buyers.

Conversely, secondary CBD office and Docklands stock remain genuinely difficult for most buyers. Mixed-use strata at residential-commercial boundaries demands specialist lender matching. Four rate rises this year mean borrowing capacity is tighter, so the deals settling are the well-prepared ones. 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.

It depends on the sector. CBD office is tightening: three new towers complete by the end of 2026 and nothing is under construction after that, which is a structural tailwind for buyers acting now. Industrial is more mixed. CBRE expects national industrial vacancy to peak in the second half of 2026 and trend lower from 2027, but Melbourne's North faces a record 421,000 sqm of new supply in 2027 (Knight Frank), so precinct selection matters.

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 (the West Gate Tunnel, open since December 2025, North East Link from 2028 and Suburban Rail Loop East 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 18.9 per cent CBD vacancy headline misses the fact that South East industrial sits around 4 per cent, city fringe office in Cremorne and Richmond is leasing well, 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, with yields still adjusting to higher rates, 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.