Melbourne’s already struggling CBD office market could lose $830 million in annual rental income if Victoria’s proposed work from home laws are passed, new analysis from BuyersAgent.com.au warns.
The city’s office vacancy rates are already the highest in the country, with 18 per cent of secondary grade office space sitting empty, well above Sydney’s 12 per cent.
Under the plan announced by Premier Jacinta Allan, Victoria would become the first Australian state to give employees the legal right to work from home two days a week if they can “reasonably” perform their duties remotely.
The state’s Labor Government intends to introduce the legislation next year.
According to the analysis, mandating two remote work days per week would see many businesses consolidate their office footprint and stagger staff attendance across the workweek.
With employees on-site three days instead of five, that’s a 40 per cent drop in daily demand for office space.
In Melbourne’s 5 million square metre CBD office market, that could leave an extra 2 million square metres vacant.
Based on current net effective rental rates of $415 per square metre, the annual revenue hit would be $830 million.
BuyersAgent.com.au CEO Shaun McGowan said the proposed WFH law could deepen the divide between premium and secondary-grade office markets.
“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,” Mr McGowan said.
He urged commercial property investors to focus on three key strategies in response to the potential shift:
- Target premium office spaces likely to attract businesses consolidating into higher-quality locations.
- Avoid B-grade properties in already oversupplied markets.
- Consider office assets in industries that may be exempt from the WFH legislation.
He warned that the proposed changes could “fundamentally shift how office property is valued” and have long-term consequences for landlords, investors and the broader commercial market.
The data for the analysis draws on a Colliers report on vacancy rates and net effective rents for the first quarter of 2025.
