The government aims to reduce its office footprint by about 20%, targeting around 80,000 square metres, down from roughly 100,000 square metres across three locations. This move comes as hybrid working arrangements reshape how public servants use office buildings and could further affect Melbourne's already sluggish commercial property market.
Vacancy rates in the CBD sit at 17.9%, particularly in fringe areas such as Docklands and St Kilda Road. The reduction in office space aligns with increased remote and flexible work practices, especially on Mondays and Fridays. The change is part of a tender process related to current leases at buildings on Exhibition Street, Nicholson Street and Franklin Street, which are all approaching expiry.
The shift has broader implications beyond the size of office spaces. Rather than providing individual desks for every public servant, the government is introducing a 60% seating ratio, allowing only 60 desks for every 100 staff. This reflects how much workplace habits have evolved since the pandemic and signals a more flexible and cost-efficient approach to operations.
Although the decision could help cut expenses and improve efficiency, leasing specialists argue that such action should have occurred earlier. With government departments set to move into more environmentally sustainable buildings, relocation could prove challenging due to tighter availability in new, premium office spaces. Melbourne's CBD is also more dependent on public sector tenants than cities in states like NSW, with fewer suburban options available for government offices.
However, industry experts suggest the move may have a positive impact. A clear step by the government might prompt other tenants to reassess their leasing decisions, potentially helping rebuild market confidence. The central issue is no longer if departments will relocate, but whether suitable office space is available for them to occupy.
