Melbourne CBD's Complex Recovery: A City in Transformation

Melbourne's Central Business District (CBD) is navigating a complex recovery, marked by persistent shifts in foot traffic patterns, varying economic indicators, and an evolving urban function since the pandemic. While weekday pedestrian numbers remain below pre-pandemic levels, overall city spending has surpassed 2019 figures, largely driven by increased weekend activity and visitor expenditure. The city is experiencing a high office vacancy rate, contrasting with a low shop vacancy rate, as businesses and infrastructure adapt to new attendance and demographic trends.

Foot Traffic and Attendance Patterns

Data indicates that overall foot traffic in Melbourne's CBD is at approximately 80% of its 2019 pre-pandemic levels across six inner-city locations. Nearly 10,000 fewer people traverse some of the city's busiest areas daily compared to 2019.

Specific areas show varied recovery:

Southern Cross Station's weekday foot traffic is 65% of pre-COVID levels, representing a 35% decrease from 2018-19. An average weekday records approximately 17,700 people near its Collins Street entrance.
Flinders Street Station's foot traffic stands at 77% of pre-COVID levels.
Bourke Street's foot traffic is just over 50% of its former level, though a rebound was observed following the opening of a flagship store. Bourke Street Mall, however, recorded a 37% increase in foot traffic in December year-over-year.

KPMG urban economist Terry Rawnsley attributes the decline in weekday foot traffic primarily to an increase in working from home, aligning with an estimated three days in the office compared to five pre-pandemic. Pedestrian counts on Mondays average approximately 14,400, and Fridays 11,700, notably lower than the average of 20,000 recorded on Tuesdays, Wednesdays, and Thursdays.

"Conversely, weekend foot traffic across most inner-city retail precincts now exceeds 2019 levels, reaching up to 110% of pre-pandemic volumes."

Melbourne Lord Mayor Nicholas Reece acknowledges a "new rhythm" in the city, suggesting lower foot traffic but higher spending on dining and weekend retail, while advocating for increased office attendance.

Economic Performance and Business Environment

Despite reduced weekday foot traffic, overall city spending has outperformed pre-pandemic figures, with visitor spending per visit increasing. In December 2025, total spending in the city reached a record $1.2 billion.

Key economic indicators:

Spending at restaurants in Carlton now surpasses 2019 levels.
The City of Melbourne reported approximately 1,500 more businesses in 2025 compared to 2024.
The CBD's shop vacancy rate is 5.6%, which is tied for the lowest among central city areas in Australia. This follows a 14% increase in shopfront activation during the second half of 2025.

Businesses are adapting to these shifts by increasing investment in social media and marketing to attract diners who are seeking comprehensive dining experiences and value. City venues are also facing increased competition from suburban restaurants and cafes that emerged during the pandemic. For example, Cecconi’s Flinders Lane, an Italian restaurant, has largely eliminated its first Friday dinner service due to the absence of a post-work crowd.

Office and Retail Vacancy Rates

A notable disparity exists between office and retail vacancy rates:

Melbourne's office vacancy rate is approximately 19%, an increase from 3% in 2019, making it the highest among Australian capital cities. This high rate is partly attributed to the 100,000 square meters of new office space opened in the latter half of 2025.
In contrast, the CBD's shop vacancy rate is 5.6%, among the lowest nationally for central city areas.

"Cameron Douglas-Perrine, a research manager at CBRE, notes a direct correlation between foot traffic and office vacancy, stating that occupiers' leasing decisions are influenced by projected office attendance."

Influencing Factors and City Transformation

Several factors contribute to the evolving dynamics of Melbourne's CBD:

Working From Home (WFH): The Allan government plans to establish working from home as a legal right by 2026, which may further influence urban attendance patterns.
Demographic Shifts: Melbourne has experienced a significant increase in immigration and international student arrivals over the past three years, contributing to a younger and more multicultural population.
Events and Investment: Major events, including the Australian Open and Australian Grand Prix, have recorded their highest attendances in history, and large-scale concerts have attracted millions. The city is also seeing a surge in international investment and jobs, particularly from global Indian IT companies.

The CBD's function is evolving beyond a primary office zone. Planned office developments have been converted to residential use, and existing offices are being redesigned for collaboration. Retail operations are adapting to serve a higher residential and visitor population. Lygon Street, for example, is undergoing revitalization with bluestone footpath paving, a new weekend market, and new restaurant and bar openings. A reset of rental prices has also attracted a new wave of retail and hospitality businesses.

"The creative economy, events, culture, nightlife, and Melbourne's role as a global education and training center are becoming increasingly prominent."

Future Outlook and Challenges

The new Metro Tunnel is projected to bring an additional 50,000 people daily into the city, expected to particularly benefit five precincts around its new stations.

However, challenges persist, including:

Concerns regarding city safety and public perceptions of safety.
Ongoing efforts to combat vandalism (tagging).