Melbourne Office Market at Risk of $830M Hit as Victoria Pushes to Enshrine WFH Rights

Victoria’s proposed move to make working from home a legal entitlement is shaping up to be a game-changer for the Melbourne CBD office market — and not in a good way.

New analysis warns that the introduction of laws guaranteeing employees two remote workdays per week could slash daily demand for office space by as much as 40 per cent, leaving millions of square metres vacant and threatening up to $830 million in annual rental income.

The forecast, released by BuyersAgent.com.au, lands a sharp blow to an office market already grappling with Australia’s highest vacancy rates. Melbourne’s secondary-grade stock sits at an 18 per cent vacancy rate — six points higher than Sydney’s.

Premier Jacinta Allan’s announcement signals that Victoria would become the first state in the country to enshrine remote work as a legal right. If the legislation passes in 2026, employees who can reasonably perform their job from home will be entitled to two days off-site each week — no questions asked.

While applauded by many workers and flexibility advocates, the plan has commercial landlords and office investors on edge.

$830M Loss, 2 Million Square Metres of Empty Space

Melbourne’s CBD office market spans approximately 5 million square metres. A 40 per cent reduction in physical attendance across the week — driven by staggered team rosters and downsizing — could see up to 2 million square metres of office space go unused.

Based on current net effective rents averaging $415 per square metre, that represents a potential $830 million blow to annual rental revenue.

“The WFH plan as it stands could create a two-tier market where only premium office space thrives,” said BuyersAgent.com.au CEO Shaun McGowan.

“The reduction in demand will put serious pressure on B-grade assets — the kind already struggling with high vacancies and low appeal.”

McGowan says the plan could “fundamentally shift how office property is valued,” with wide-reaching implications for commercial landlords, institutional investors, and REITs.

Winners, Losers, and What Comes Next

The analysis lays out a roadmap for investors facing a possible post-WFH future:

• Double down on premium: Tenants consolidating office space will favour high-end buildings with better amenities.

• Avoid the dead weight: Secondary and B-grade office assets in oversupplied markets are likely to face even sharper declines in value and rentability.

• Target essential sectors: Look to industries with frontline obligations — think healthcare, legal, education — where in-office presence remains critical.

  
  

With Melbourne’s office market already on a knife’s edge, Victoria’s WFH proposal could accelerate a structural reset that’s been years in the making.

Investors who don’t adapt may find themselves stuck with assets no longer aligned to the modern workforce.

“Working from home is no longer a pandemic trend — it’s the new professional expectation,” McGowan said. “The commercial property sector needs to accept that the reset button has been hit.”

The findings draw on data from Colliers’ Q1 2025 Office Market Report, paired with BuyersAgent.com.au’s internal forecasting models.