Office towers are sitting empty across the country with the vacancy rate at its highest level in close to 25 years, yet there is evidence that companies are making longer-term lease commitments for staff to return to the workplace in future.

A report by the Property Council of Australia (PCA) shows the national office vacancy rate increased from 11.6 per cent to 11.9 per cent for the six-month period to July 2021. This comes from the double whammy of COVID-wary workers staying at home and a large increase in new office supply. This is an increase from 9.6 per cent in July last year.

Melbourne, now the country’s largest office market by square metres, was the hardest hit with its vacancy rate at 10.4 per cent being the highest level since January 2000. The city continues to feel the impact of repeated lockdowns and companies handing back space.

The Office Market Report report measures the levels of leased space, not worker occupancy of office space.

PCA chief executive Ken Morrison said the national average CBD vacancy rate edged higher from 11.1 per cent to 11.2 per cent. Non-CBD markets also recorded a small vacancy increase, from 13 per cent to 13.6 per cent.

“Australia’s office markets have shown remarkable resilience over the past six months, with overall aggregate vacancy levels only increasing slightly,” Mr Morrison said. “Excluding Melbourne, demand for CBD office space grew by 85,000 square metres over the six months, a result that few would have predicted given the impacts of the pandemic.”

The glut of empty space has prompted calls from landlords, city officials and governments for businesses to hasten employees’ return to work, but most acknowledge flexible work arrangements are here to stay.

National Australia Bank and Telstra are among corporations that have handed back unwanted space to the landlord, particularly in Melbourne, as they adopt a flexible strategy to allow workers to stay at home for some of the week.

But as some opt to decrease requirements, industry sectors such as public administration, professional services and healthcare are looking to expand. The tech giant Atlassian has led the charge in Sydney after signing a 15-year lease at the new Haymarket tech centre.