Melbourne reports Australia's lowest office occupancy

Work is changing – as computers have become increasingly capable, new technologies such as videoconferencing have enabled workers to work in new environments – such as their homes.

For the latest generation, the water-cooler conversation isn’t just by the water cooler at the office – it’s having the flexibility to do what you need while being able to live your life around work.

Hybrid and remote working arrangements are a considerable office perk – and for many Melburnians, it’s a perk that can be helpful, depending on your circumstances. If you’re working in management or studying for a Masters of Leadership, you’ll understand the importance of creating a supporting environment for your team.

What does this mean for the businesses that operate around office buildings? Is this the end for the CBD coffee shop? As we’ll soon find out, while Melbourne may be experiencing a significant change in how people move around the city, the challenges that businesses face are not impossible to overcome.

Are Melburnians avoiding the office?

For many office landlords, the decline in office occupancy raises a simple question: Why are Melburnians not returning to the office while occupancy continues to rise in other states?

The answer lies in the unique circumstances that Melburnians have gone through during the past decade.

Melbourne’s CBD has seen significant upheaval in recent years. Sure, while a major pandemic shut down large swathes of the city for the better part of two years, Melburnians have had a far more extended period of disengagement from the office.

As major infrastructure projects, such as Melbourne’s Metro Tunnel, have leapt into action, construction hoardings and blockades have taken over large portions of the city. Combined with Melbourne’s appreciation for contested spaces, from flash mobs to protests, this creates a unique opportunity for workers to avoid the CBD when possible.

These disruptions have impacted workers' ability to get to offices, forcing them to reconsider whether they must be at the office to complete their jobs. As it turns out, with the advantages of modern technology, many office-bound Melburnians have found themselves able to work from home – free from the construction noise and protests that encompass the city during working hours.

Challenges for CBD businesses

When office occupancy declines, the ripple effects are felt across the local business landscape. From cafes to retail outlets, these businesses rely on the foot traffic generated by office workers, making Melbourne's CBD a vital hub for the daytime economy.

A prime example is retail locations such as Southern Cross Station, one of Melbourne’s major transport hubs. While there are more than 60 million passenger journeys that pass through the station each year, it has struggled to retain tenancies, leading to an increasing number of vendors closing down.

Melbourne has a renowned nightlife, with events like major sports, arts, music, and cultural events that capture the public's hearts and minds. There are very few places around the world where you can get nearly 100,000 people into a stadium for a Taylor Swift concert – and Melbourne’s remarkable nightlife means that these sorts of massive events happen pretty regularly.

However, the challenge for CBD businesses is that the foot traffic that comes with night-time events simply isn’t the same as day traffic. A cafe that opens at 7am for the breakfast rush at a food court is unlikely to be open at 7pm to feed hungry footy spectators. A customer looking to attend a concert is unlikely to need dry-cleaning taken in after the show.

Fundamentally, foot traffic during the day vastly differs from that at night, presenting unique challenges for businesses operating in Melbourne’s central business district. Is it possible to operate a business in a way that can capitalise on the opportunities that daytime workers and nightlife lovers have available to them?

Foot traffic shifts inspire new ideas

For one lobby group, the changes in customer behaviour call for a rethink of a business's core trading hours. In recent months, a new report by the Australian Retailers Association has found that retailers have an opportunity to adjust trading hours to allow for greater freedom from customers and create a connection between daytime and evening trade – something seldom seen in the city.

In partnership with the Victorian Government and the City of Melbourne, the Twilight Trade project is actively exploring the viability of shifting business's standard trading hours to finish later. It is looking to find ways to harness the power of increased evening foot traffic to provide a valuable trading lifeline for businesses that have struggled through construction disruption, the pandemic, and the tourism disruptions that have come with it.

Using data available from the City of Melbourne’s Pedestrian Counting System, a dataset that captures anonymous, real-time pedestrian data across a range of sensors, researchers at the Australian Retailers Association identified that pedestrian commuter patterns had changed from 2019 to 2023.

In particular, the report identified that pedestrian behaviour had shifted – instead of sticking to workplaces and immediately heading home after work, employees finishing later tended to gravitate towards social locations – the Melbourne nightlife. This research has had several stages, including a trial known as Live at Errol Street, which had promising results.

Addressing a changing workplace dynamic

As office occupancy hits record lows in Melbourne, businesses that trade during the day must consider how they will survive in a changing environment.

While it may take a while for Melburnians to return to the office – and in some cases, they may never return – industry and government are committed to ensuring that CBD businesses survive the challenges that lie ahead of them.

While we may not know what office occupancy will look like five, 10, or 20 years from now, we know many things are certain. Melbourne will continue to have a thriving nightlife – whether it be concerts from major artists, cultural showcases like the Melbourne International Comedy Festival, or sporting touchstones like the AFL premiership season.

As a city, Melbourne will continue to grow – and if some demographic predictions come true, Melbourne may be the biggest city in Australia in a decade or two from now.

Will customers return to the stores in a world that’s changed immensely in the past decade? Ultimately, time will tell – but for now, at least, it’s looking hopeful for retailers in Melbourne’s CBD. There are opportunities – now, today's retailers just need to seize them.