With Melbourne's CBD office vacancy rate at 19% as of January — the highest of any major Australian capital — attention is turning to an underutilised asset hiding in plain sight: empty second-grade office buildings in and around the CBD.
The national housing shortfall makes the case more urgent. The NHSAC's State of the Housing System 2026 estimates around 980,000 new homes will be delivered over the five-year Housing Accord period — still well short of the government's 1.2 million target, and with the council warning that rising construction costs linked to global instability could push completions lower still.
RMIT University Professor of Sustainable Built Environment Usha Iyer-Raniga argues the case for conversion is compelling — commercially as well as socially.
For building owners, Iyer-Raniga says the financial logic is straightforward.
"Leaving the buildings as they are not only reduces rental income for the owners; it also reduces their asset value over time,” she said. “Unoccupied buildings may attract unwanted social attention, further degrading the value of the property and its immediate surrounds."
Beyond the balance sheet, Iyer-Raniga points to the locational strengths many of these properties already have.
"Adaptive reuse of vacant office buildings may partially solve the housing crisis. These buildings offer a great opportunity as they are often accessible and situated close to amenities," she said.
One Melbourne project is already demonstrating what is possible. Make Room at 602 Little Bourke Street has been converted into transitional housing for vulnerable people — proof, Iyer-Raniga said, that the model works and that it shows "how collaboration can support pathways to permanent housing."
Not every vacant office will suit residential use, she acknowledges. Some may be better repurposed as student accommodation, aged care facilities, medical clinics, or childcare centres — all of which can relieve pressure on strained urban infrastructure in their own right.
The biggest obstacle between ambition and outcome is resources.
"Depending on the location and amenities needed, a detailed study will need to take place to determine opportunities for adaptive reuse, along with government funding to support these initiatives," Iyer-Raniga said.
That dependency on public funding means progress will likely be uneven and contingent on policy settings at both state and federal levels.
Get the hottest and freshest property and mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
