New analysis from BuyersAgent.com.au reveals Victoria’s proposed work from home (WFH) law could wipe $830 million annually from Melbourne’s already struggling CBD office rental market.
Melbourne’s vacancy rates are already the highest in the country, sitting at 18% and well above Sydney’s 12% for secondary grade office space.
If the State Government’s plan to mandate two days of remote work per week goes ahead, business operators are likely to consolidate their office footprint and stagger staff attendance evenly across the workweek.
With employees working from home two days a week instead of five, office attendance drops to three days, representing a 40% reduction in daily office space demand.
In Melbourne’s 5 million square metre CBD office market, this could leave an additional 2 million square metres vacant. At current net effective rental rates of $415 per square metre, that represents an $830 million annual revenue loss, a devastating blow to a sector already in crisis.
BuyersAgent.com.au CEO, Shaun McGowan, says the proposed WFH law could devastate the bottom end of the market and fundamentally shift how office property is valued.
“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.”
McGowan says commercial property investors should focus on three key strategies:
- 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.
The legislation, announced by Premier Jacinta Allan, would make Victoria the first Australian state to enshrine working from home as a legal right for employees who can ‘reasonably’ perform their duties remotely.
The state’s Labor Government plans to introduce its WFH legislation next year.
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