Renewed optimism in Victorian capital bodes well for broader national economy
Melbourne’s commercial property market has staged a turnaround after an extensive term as the laggard of Australia.
Confidence in the Garden State capital has surged into positive territory for the first time since 2022, per NAB’s Commercial Property survey for the second quarter of 2025.
Melbourne’s office property sector is leading the resurgence, with retail also showing early signs of improvement.
Confidence in Melbourne’s office market jumped to +21 in the latest quarter, marking the first positive result since the onset of the pandemic.
This reversal is being driven by a combination of factors: fewer empty offices, rising hopes for property value growth and a noticeably brighter mood among both developers and investors.
Discussing the results of the survey, Andrew Auerbach, NAB group executive business and private banking, said: “With confidence returning to Melbourne’s commercial property market, businesses are feeling more secure about leasing new office space, expanding operations, or even buying property.”
Auerbach has also seen renewed interest from both local and interstate investors, “and this momentum is creating new opportunities for growth and innovation across the region”.
On a national level, the NAB Commercial Property Index remains close to its highest level in eight years, despite a slight dip this quarter to +20 from +24.
The report attributed this ongoing recovery to strong results in the industrial and hotel sectors, as well as improvements in office and retail – particularly in Victoria.
Industrial property continues to be a pillar of strength, with the highest confidence levels projected over the next 12 months (+53) and two years (+63).
Meanwhile, retail, which had lagged behind, is showing signs of catching up, especially in Victoria, where sentiment has turned positive for the first time since March 2022.
The national office vacancy rate improved to 10.7% in June, down from 11.4%, with further declines expected over the next two years.
Victoria’s office vacancy rate, while still in double digits, is on a downward trajectory, reflecting the broader trend of recovery.
In terms of capital growth, the outlook for office values in Victoria, though still negative at -0.7% for the next year, represents a significant improvement from the previous quarter’s -5.1%.
Retail sentiment, while still below the national average, is also on the mend, with expectations for rental growth in Victoria among the highest in the country.
“The return of confidence in commercial property more generally is a positive signal for the broader economy,” said Auerbach. “It suggests that businesses are feeling more optimistic, hiring staff, and planning for growth.”
