Owner-occupiers are emerging as the dominant force in Melbourne’s inner-city commercial property market, as developers and investors retreat in the face of rising construction costs and tighter margins.
Max Warren, Director at Stonebridge Property Group, said the shift is reshaping the market landscape.
“Owner-occupiers can often borrow at higher loan-to-value ratios, which puts them at a real advantage, and developers and investors are regularly being outbid,” he said.
“For the first time in more than a decade, tenants who have previously rented are now the most aggressive buyers.”
A recent sale at 310 and 312–314 Hoddle Street, Abbotsford – purchased by an owner-occupier for $6.6 million – reflects the trend.
“It was more than 1,200 square metres, and a few years ago it would have gone to a developer,” Mr Warren said. “This time, it sold to someone who had been searching in Collingwood and Abbotsford for years and was finally able to secure a site with vacant possession.”
Dylan Kilner, Director at Stonebridge Property Group, highlighted the collaborative efforts of their team to meet the needs of this evolving buyer base
“In response to the surge in demand from business owners, we’ve partnered with Ready Media Group on a targeted campaign,” Mr Kilner said. “We’ve launched a package called Owner-Occupier Plus, which allows buyers to search specifically for properties that suit their needs. It’s been working really well – we’re getting stronger cut-through and a lot more enquiry from the right buyers.”
Mr Kilner and Mr Warren specialise in the sale of freestanding buildings across Melbourne’s inner ring – from Fitzroy and Collingwood to Richmond, Cremorne and South Melbourne.
“There weren’t many agents doing heavy transactional work in the inner-city core,” Mr. Kilner said. “We saw a lack of specialisation in vacant warehouses, office buildings and value-add assets in the city, and jumped at the opportunity.”
The nature of the properties – and their locations – adds to the appeal.
“We are both relatively young, and these suburbs are full of energy – they’ve got great pubs, bars and really unique properties,” Mr Warren said. “We genuinely enjoy the product we’re selling.”
Despite broader economic uncertainty, Mr Warren noted that the market for inner-city assets remains resilient.
“It’s not a bull market, but it’s not a bust either,” he said. “We’re fortunate to be in a segment driven by owner-occupiers, who are less reactive to volatility.”
However, Mr Kilner warned that some vendors may be misjudging the current conditions.
“One of the common mistakes we’re seeing is people waiting too long to sell,” he said. “Given Victoria’s strong immigration and relatively stable economy, it’s still a good time to divest and put that capital to work.”
Looking ahead, Mr Kilner anticipates improving conditions in late 2025 and into 2026 – particularly if interest rates begin to fall.
“We’re likely to see further decreases in interest rates in the near future,” he said.
“Historically, every time the RBA cuts rates, the commercial market gets a lift. That doesn’t mean prices will surge, but it will help give the investor market a boost – and we hope to see that continue into next year.”
