Most Melbourne office workers are still staying away in droves, prompting grim predictions for some empty and obsolete CBD towers.

The Property Council of Australia’s national monthly report reveals a 1 percentage point lift in office occupancy in August, bringing Melbourne’s average for the month to 39 per cent of pre-pandemic levels.

The number of workers coming to Melbourne’s office buildings has only improved by a tiny fraction over the past month.Credit:Joe Armao

The commercial property lobby group had been celebrating month-on-month improvements from January this year – when occupancy was just 4 per cent of the pre-pandemic average – to May, when the city reached 49 per cent.

But winter weather, a COVID-19 wave and work-from-home recommendations from the state government led to a dive of 11 percentage points in July.

Melbourne has gone at least 24 months in a row without topping the 50 per cent occupancy mark.

Sydney is 14 percentage points ahead of Melbourne on 53 per cent, followed by Brisbane (57 per cent), Canberra (64 per cent), Perth (69 per cent) and Adelaide (71 per cent).

The state government lifted its COVID-19 work-from-home recommendations last week and there are signs of higher occupancy in September, but experts are questioning the long-term viability of the city’s worst-quality buildings.

John Garimort, lecturer at RMIT’s School of Property and Construction, said he believed the pandemic and the upheaval of new working-from-home habits would “fast-forward obsolescence” for some CBD buildings.

“Older buildings fall out of favour more quickly, and there are very limited options on what they can be used for,” he said.

Although the pandemic generated ideas for converting empty office buildings into residential buildings, Garimort said many lower-grade buildings that could be left vacant were not appropriate for conversion.

“It’s going to be a problem for some of those assets,” he said.

Jonathon Close,​​ associate director at property valuation firm M3 properties, said he was expecting tenants in low-grade buildings to move to more luxurious addresses as a way of incentivising staff attendance when their leases come up for renewal.

“Tenants are happy to come in and commit to 2000 square metres of A-grade space, but for B and C grade quality there is definitely minimal commitment – they will leave,” he said.

A recent RMIT study found that Melbourne’s CBD workers were spending fewer than 17 hours a week in the city, and only one in eight went to the office every day of the working week.

Chas Keogh, from commercial real estate firm Cushman and Wakefield, said his tenant clients were looking at options to “downsize but upgrade” but the speed at which that was happening differed depending on the size of the company.

He said small companies of 20 to 30 staff were able to move much more easily than larger companies because they often had more flexibility in their contracts. Those stuck in more rigid contracts were taking a hit on their bottom line, he said.

“If you need to have the lights on for 3000 square metres but you have only 30 per cent office occupancy then that has an impact,” Keogh said.

One large employer – consultancy firm Arup at 699 Collins Street – has seen more staff in the office in the past week since the work-from-home advice changed.

Credit:Matt Golding

Kriston Symons, principal of markets and clients at Arup, said the 450-desk capacity building was now about 70 per cent full.

“It’s been climbing about 5 per cent a week for a while,” he said.

Symons said he chalked up his office’s higher-than-average occupancy to a number of factors including spring weather and staff incentives such as a breakfast bar, fruit and salad boxes.

The Property Council’s acting Victorian executive director, Adina Cirson, said there was hope for businesses that relied on office workers, with spring football finals drawing people into the city and the eased work-from-home advice.

“While these numbers certainly indicate challenges for our CBD, this is also a fantastic opportunity for business, government and the City of Melbourne to work together constructively to find tangible solutions and encourage people back into their offices,” she said.

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