A new report from the City of Melbourne has blamed “new and increased” property taxes and “government intervention in workplace arrangements” for higher than expected office vacancies.
Town Hall’s “The Melbourne Advantage” program released its first report this week, as part of a council effort to track its progress towards 2030 economic goals.
It revealed that while the city’s economy was growing, office and shopfront vacancies were still hampering Melbourne’s growth.
Shopfront vacancies were completely off track for a goal of below 5 per cent by 2030, instead growing to 6.7 per cent in the 2025/26 financial year.
The report explained this away as due to “new and long-awaited premium stock coming onto the retail property market, including Melbourne Walk adjacent to Mecca Bourke Street”.
At the same time office vacancies were still well above the 2030 target of below 15 per cent, instead at 17.94 per cent in 2025/26.
While a similar explanation was offered of an influx of “new, high-quality supply”, the council also found the Victorian government’s tax settings were pushing developers and tenants out.
“The Melbourne office market is also cautious due to new and increased property taxes eroding confidence and pushing domestic and global investors to look elsewhere,” the report found.
“As well as growing uncertainty around proposed government intervention in workplace arrangements to mandate the right to work from home.”
Lord Mayor Nick Reece would “continue to advocate for the conditions” that would boost Melbourne’s economy, in line with the report’s goals.
“Costs that discourage investment like foreign buyer taxes and surcharges should be eased in these zones,” Mr Reece said.
“We urgently need to make Melbourne competitive – more than ever investors can easily choose Sydney, Brisbane or Singapore instead.”
The Herald Sun reported last week that there was enough empty space to accommodate almost 83,000 staff in the CBD, as the Property Council warned Melbourne’s office recovery was in a fragile state.
The report also showed that the city’s official ranking for the “student experience” has plummeted from second in the world to sixth.
The council report lays the blame squarely on aggressive federal government policy shifts that have made Australia more expensive for international students.
On July 1, the federal government hiked the non-refundable student visa application fee by 20 per cent to $2500.
Graduates wishing to stay and work in Victoria faced a Temporary Graduate Visa fee starting at $5750.
The council report warned the financial barriers were already “discouraging talented graduates” in critical skill-shortage sectors and will directly trigger “lower spending on accommodation, hospitality, retail, transport and other local services” across the city.
Newly minted premier Ben Carroll has hit the brakes on his predecessor Jacinta Allan’s work-from-home legislation, signalling he would work with business to amend the reforms, while outright delaying implementation of the change until 2027.
While the office vacancies and student experience were off track, 14 of the Melbourne Advantage program’s 16 goals were heading in the right direction.