The Melbourne Office Property Cycle 1970-2005

The office property cycles in Melbourne are identified and associated with the fundamentals of office supply and demand. Despite encouraging signs in the early and mid-1980s (low vacancies and rapid rental growth), there were significant warnings prior to the major 1980s/90s property cycle (absence of demand, low effective rental values). The result has been a substantial oversupply of office space and a catastrophic fall in rental values. Encouraging signs of recovery in the mid- to late-1990s led to another expansionary cycle the effects of which (vacancies and falling rental values) are only just becoming obvious. The rental values required for financial viability are compared with effective market rental values to illustrate the shape of the cycles. It is demonstrated that short periods of viability lead to unsustainable expansions in the market that in turn lead to long periods of contraction and recession.