A loan for commercial property in the Melbourne CBD is assessed against a market where about a fifth of office space is vacant. The Property Council put CBD office vacancy at 18.9% in July 2026, and JLL's Q2 2026 headline figure is 20.5%. Outside the core it runs wider: Cushman & Wakefield puts Southbank at 18.8% and St Kilda Road at 31.8% (Q3 2026). A high yield in these precincts usually prices that vacancy risk, and lenders size the loan to match.
This page is the precinct-by-precinct picture for the CBD, Southbank and St Kilda Road, written for the buyer of a whole building and the buyer of a single strata suite. How lenders treat office in general, including how valuers handle rising vacancy, is set out in our article on lending against office property when vacancy rises. The approval framework that applies to any Melbourne property is on our Melbourne commercial property finance page, and the other markets we cover are listed on where we arrange commercial property finance.
How much of Melbourne's CBD, Southbank and St Kilda Road office space is empty?
Each publisher measures a slightly different stock base, so the table keeps them apart. The broad picture is consistent: the CBD sits around 18.9% to 20.5%, Southbank is close to it and rising, and St Kilda Road is well above both.
| Precinct and source | Vacancy | Rent and incentive | Yield |
|---|---|---|---|
| CBD, Property Council, July 2026 | 18.9% | Not published | Not published |
| CBD, JLL, Q2 2026 | 20.5% headline | Not published | 5.88% to 8.50% prime, unchanged |
| CBD, CBRE, Q1 2026 | 19.0% | Prime effective rents up 3.3% a year; Eastern Core up 11.1% | 7.08% |
| Southbank, Cushman & Wakefield, Q3 2026 | 18.8%, up from 15.0% | $684/sqm net face; 35% incentive | 7.50%, from 7.63% |
| St Kilda Road, Cushman & Wakefield, Q3 2026 | 31.8% | $520/sqm net face; incentive not published | 9.25%, from 8.20% |
| Docklands, Knight Frank, Feb 2026 | Not published as a figure; among the three highest-vacancy CBD precincts | Not published | Not published |
Southbank and St Kilda Road are moving the wrong way. Cushman & Wakefield reports that across those two precincts, six-month net absorption was negative 19,838 sqm in Q3 2026, meaning tenants handed back more space than they took. Across all four fringe office markets Cushman tracks (St Kilda Road, Southbank, Richmond and Cremorne, Collingwood and Fitzroy), vacancy is 26.5%.
Why does a 9.25% St Kilda Road yield not mean a bigger loan?
Because the yield went up for a reason. Cushman & Wakefield's St Kilda Road yield moved from 8.20% to 9.25% while vacancy sat at 31.8%. Buyers are asking for more income per dollar because they doubt that income will last. A lender reads the same signal and sizes the loan on the risk, so the extra rent in a high yield rarely turns into extra debt. For comparison, Knight Frank puts the prime industrial yield in Melbourne's north at 6.25% (Q2 2026), with vacancy of 7.7% against St Kilda Road's 31.8%.
The clearest recent marker is 380 St Kilda Road. Mirvac sold the 26,892 sqm building for about $130m in July 2026, roughly 20% below the $163.4m it was held at in December, with the building about 55% occupied (realcommercial, 2 Jul 2026). How lenders treat office when vacancy rises is covered in our office vacancy article. A building with close to half its space empty can't be valued on full income, and that is what a lender is looking at.
| Purchase price | $2,000,000 |
| Yield (illustrative, Cushman & Wakefield's Q3 2026 St Kilda Road figure) | 9.25%, or $185,000 net rent a year from two tenants paying equal rent |
| Interest rate and cover (illustrative) | 7.23%, with rent required to cover interest 1.5 times |
| Loan the rent alone would support | $185,000 divided by 1.5, divided by 7.23% = about $1.71m, or 85% of the price |
| Loan at an illustrative 60% to 65% LVR | $1.2m to $1.3m, possibly lower with 31.8% precinct vacancy |
| If one tenant leaves | Rent falls to $92,500; on a $1.2m loan, interest is about $86,800 and cover drops to about 1.07 times |
The rent alone would support 85% of the price, far above what lenders advance on office. The LVR limit binds far below that, at the broad 60% to 65% guide for office investment lending published in our office vacancy article. The second risk is the one that catches buyers: lose one of the two tenants and the income test fails too. With half the rent, the floor supports only about $853,000, around 43% of the price, so the loan the LVR allowed is now too big for the income.
Illustrative only. Rates, LVRs and cover ratios vary by lender, asset and borrower.
If you're weighing a high-yield office floor and want both tests run on the real lease, get in touch.
Which CBD precincts are leasing up, and which are not?
The Eastern Core is the strongest part of the city. CBRE's Q1 2026 data shows prime effective rents up 3.3% a year across the CBD and 11.1% in the Eastern Core. Effective rent is what a landlord keeps after incentives, so a rise there is real income, and it's the figure a valuer cares about.
The western side of the CBD is a different story. Knight Frank's February 2026 report shows Docklands led net absorption in the second half of 2025, taking up 32,485 sqm, yet it remains among the three highest-vacancy CBD precincts along with Flagstaff and Spencer. Space is being leased there, from a high base of empty floors. JLL's prime yield range of 5.88% to 8.50% shows how widely buildings are priced across the city, and where a building sits in that range says a lot about how a lender will view it.
Eastern Core prime
Effective rents up 11.1% a year (CBRE, Q1 2026). The strongest office credit in the city: lenders weigh the tenant and lease term, with less concern about re-letting.
Flagstaff, Spencer and Docklands
Among the three highest-vacancy precincts (Knight Frank, February 2026). Lease term and tenant quality do most of the work, and a lender will want to know how long empty floors would take to fill.
Southbank
Vacancy rose from 15.0% to 18.8% with 35% incentives (Cushman & Wakefield, Q3 2026). Face rent of $684/sqm sits well above what a landlord keeps, so valuers work from the lower effective figure.
St Kilda Road
31.8% vacancy and a 9.25% yield (Cushman & Wakefield, Q3 2026). Expect lower LVRs and a close read of the tenancy schedule, lease by lease.
Strata office suites
A single suite bought to run your own business from is assessed mainly on your business's cash flow. Bought as an investment, it's assessed on its lease and tenant. The next section covers what a lender looks at in each case.
How do lenders assess a strata office suite in the CBD?
It depends first on who will use it. If your business will occupy the suite, the lender looks mainly at your business's earnings and whether they cover the loan, with the suite as security. That path depends less on precinct vacancy, because the rent isn't coming from a tenant who might leave. If you're buying the suite as an investment, the lender looks at the lease: who the tenant is, how long is left, and whether the rent stacks up against similar suites nearby.
For either buyer, the lender also looks at the building. Its grade, its position in the city and the vacancy in its precinct all feed into the valuation, and the owners corporation records show the levies and any major works coming. Lender appetite for smaller strata suites varies, so it's worth checking which lenders will take the specific suite before you sign. The illustrative 60% to 65% office guide is in the FAQ below.
Self-managed super funds can still buy commercial premises with borrowed money. Our article on SMSF commercial property borrowing explains that the 2026 law change bans new limited recourse borrowing for residential property only, so an SMSF can still borrow to buy a suite that your business leases from it.
What do the July 2027 work-from-home law and the government's office handback mean for CBD lenders?
They add a Melbourne-specific question to any office loan. In August 2026 the Victorian Government delayed its work-from-home laws until July 2027, and it is returning up to 30,000 sqm of its own office space to the market this year and 100,000 sqm by 2028, which CBRE said creates short-term vacancy risk (realcommercial, 12 Aug 2026).
For a lender, that means more competing space coming back to the market at a time when CBD vacancy is already around 18.9% to 20.5%. If the building you're buying has leases ending before 2028, expect to be asked how those floors would be re-let against that extra supply. Having a re-leasing plan, or a renewal already signed, is the most useful answer you can bring. Melbourne's city fringe office market, where Cushman & Wakefield reports incentives of 33% to 34% in Q3 2026, is covered on our Richmond, Cremorne and Collingwood commercial property loans page.
Questions about loans for CBD office property
Can I get a loan for an office suite in the Melbourne CBD?
Yes, and lenders assess it on the suite's lease, or on your business if you'll occupy it. As an illustrative guide, office investment lending tends to sit around 60% to 65% LVR, lower for older or secondary buildings. Check which lenders will take the specific building and suite before you sign the contract.
Why are St Kilda Road office yields so high?
Because buyers are pricing in empty space. Cushman & Wakefield puts St Kilda Road office vacancy at 31.8% and the yield at 9.25%, up from 8.20%, in Q3 2026. A higher yield there usually signals more risk to the income, so read the tenancy schedule and lease expiries before you treat the yield as a return.
Is Southbank office harder to finance than CBD office?
It depends on the building more than the precinct. Cushman & Wakefield reports Southbank vacancy rose to 18.8% from 15.0% in Q3 2026, with 35% incentives, close to the CBD's 18.9% to 20.5% range. Lenders look at lease term and tenant quality in both, so bring the lease details to the first conversation.
Will a lender count rent from a tenant whose lease ends next year?
Usually only with caution. A lease with a year to run gives the valuer and lender little contracted income, and with CBD vacancy around 18.9% to 20.5% they'll ask how long re-leasing would take. A renewal or new lease signed before settlement is the strongest fix, so raise any expiries early.
Can my SMSF buy a CBD office for my business?
Yes. An SMSF can still borrow through a limited recourse borrowing arrangement to buy commercial premises your business leases, because the 2026 law change bans new residential arrangements only. Your accountant and SMSF specialist set up the structure, and we arrange the lending once that's decided.
Sources
- Property Council of Australia, Office Market Report, July 2026, as reported by realcommercial.com.au, 12 August 2026
- Knight Frank, Melbourne CBD Office Market Report, February 2026 (Docklands, Flagstaff and Spencer)
- JLL, Melbourne Office Market Dynamics, Q2 2026
- Cushman & Wakefield, Melbourne Fringe Office MarketBeat, Q3 2026
- CBRE, Australian Office Figures, Q1 2026
- realcommercial.com.au, Mirvac sells St Kilda Road office complex for $130m amid market reset, 2 July 2026
- realcommercial.com.au, Victorian Premier Carroll's WFH delay could turbocharge Melbourne office recovery, 12 August 2026
Yields, vacancy and rents are market commentary from the named publishers. They aren't FGO or lender policy.