Plans to convert empty office blocks into homes in Australia have ground to a halt, despite rising office vacancies and a worsening housing shortage. Developers have not submitted a single application for office-to-residential conversion in central Melbourne since 2023, and only one has been approved in Sydney's CBD in the same period.
High refit costs and strict planning rules have deterred landlords, according to research by architecture firm Hassell. One study identified 86 office blocks in Melbourne suitable for redevelopment, but converting half would yield up to 12,000 apartments. However, the owner of one such block opted to lease to new commercial tenants after a feasibility study showed a profit margin of just 0.05%. 'There aren’t any developers out there that want to make point-zero-something per cent profit,' said Ingrid Bakker, the study's lead author.
Commercial landlords have instead refurbished existing offices or withdrawn properties from the market. Office vacancy rates in Melbourne hit a 30-year high of 15% in July, while rental housing availability fell to a record low of 1.47%. In contrast, the United States and United Kingdom have eased planning rules to encourage conversions, though this has sometimes led to cramped, windowless flats.
Australia has resisted such deregulation, meaning conversions remain more expensive than building from scratch. 'Because of compliance with planning and building codes, it can be quite expensive, and you have to put a lot more kitchens and bathrooms for each apartment,' said Sara Wilkinson, a professor of sustainable property at the University of Technology Sydney.
The sole successful conversion in Sydney is a century-old former warehouse in Ultimo, where 156 apartments are planned. One other project is under consideration. Some developers have opted to demolish and rebuild, while a 14-storey vacant building in North Sydney will now house commercial and education facilities after council opposed a build-to-rent project. With over 60,000 square metres of Sydney CBD office space expected to be retired in the next five years, the dream of turning empty offices into homes appears over for now.
