Gross take up levels were steady in Q4 2025, in line with long-term averages

• Gross take up levels across the Melbourne market totalled 287,200sqm. The manufacturing sector led gross take up, accounting for 34.1%, followed by the transport, postal and warehousing sector (22.1%) and Retail Trade sector (12.6%).
• Demand was centralised to Melbourne’s West precinct accounting for 70% of gross take up in Q4 2025, totalling 199,700sqm. This was followed by the South East precinct accounting for 18%, the North accounting for 8% and the City Fringe accounting for 4%.

Headline vacancy increases to 5.3%

• New supply totalled 244,700sqm in Q4 2025, a 37% increase from the previous quarter. 68.3% of stock was absorbed into the market upon completion, the highest absorption rate year to date as pre-commitment trend upwards and speculative development commencements decrease. 
• Melbourne’s headline vacancy increased to 5.3% in Q4 2025. This was attributed to a rise in secondary vacancy and unabsorbed speculative stock in Melbourne’s South East precinct as we continue to witness quality migration from secondary to super prime assets.

Investment volumes continue to decrease with the lowest quarterly investment total since Q1 2020

• Prime and secondary net face rental growth was relatively stable across all Melbourne precincts apart from the City Fringe, which saw an uptick in net face rents and a decrease in incentives. Average incentives increased across all grades in the South East precinct.
• Investments volumes continue to decrease as investors favour other key east coast markets. Transaction volumes totalled AUD 567.0 million, with geographically, the South East leading transaction activity accounting for 55% of investment volumes.

Outlook: Yields are expected to remain stable in the near term with uncertainty around cost of debt and sovereign risk

• Net effective rental growth is expected to recuperate from a revision period across 2025 as incentives stabilise at their peak in Melbourne’s North and West precincts.
• Supply levels are expected to ease in the near term and speculative development starts decrease. Albeit developers are looking ahead of the current supply/demand imbalance in the medium and long term to cater for future population growth and demand.