Headline vacancy remained elevated across all three markets in Q1 2026. The CBD, Fringe and S.E.S markets each recorded negative net absorption during the quarter

• The CBD headline vacancy rate was 19.7%, representing 1.1 million sq.m. of unoccupied stock. Net absorption totalled -24,600 sq.m. over Q1. One project completed during the quarter, delivering 45,000 sq.m. at 7 Spencer Street with a pre-commitment rate of 10.1%.
• Three projects remain under construction and are scheduled to deliver a combined 98,000 sq.m. by early 2028. Prime yields were reported at 5.88%-8.50%. No transactions above AUD 5.0 million were recorded during the quarter.

The Melbourne CBD recorded one project reaching completion over Q1 2026, delivering 45,000 sq.m. In the Fringe market, one project completed totalling 12,100 sq.m., while no completions were recorded in the S.E.S market

• The Fringe market recorded net absorption of -11,700 sq.m., with headline vacancy at 21.4%, representing 443,000 sq.m. of unoccupied stock. One project completed during the quarter, delivering 12,100 sq.m. at 33 Victoria Parade with a pre-commitment rate of 42.7%.
• Seven projects are under construction and are scheduled to deliver 60,000 sq.m. by late 2027. Prime yields were reported at 6.50%-9.00%. Two transactions were recorded for a combined AUD 291.5 million.

The CBD pipeline remains limited in the near-term, with additional supply scheduled for delivery from the Fringe market through late 2027

• The S.E.S. market recorded net absorption of -3,900 sq.m. Headline vacancy was 15.1%, representing 234,000 sq.m. of unoccupied stock. No project completions were recorded during the quarter. Prime yields were reported at 7.25%-8.75%.
• Two transactions were recorded for a combined AUD 38.8 million.

Outlook: Melbourne CBD demand likely to remain constrained over 2026

• Leasing conditions in the CBD are expected to remain muted over the near-term, reflecting Q1 demand results and supply completions scheduled over 2026. The Fringe demand outlook remains positive, supported by heads of agreement signed for two tenants decentralising from the CBD. In contrast, the S.E.S.
• Demand outlook reflects softer conditions characterised by negative net absorption, with future absorption expected to be driven primarily by existing occupier expansion and tenant relocation activity. Capital market activity is anticipated to remain measured across all three markets, consistent with limited transaction volumes over the quarter.