A New Urban Chapter for Melbourne
Melbourne is not short of buildings. It is short of the right ones being used in the right way.
Across the CBD, dozens of office towers built before 1990 now sit in a strange in-between. At the same time, the city is experiencing the opposite pressure. Housing is constrained. Rents continue to rise. Key workers, students, and young professionals are pushed further from the centre they help sustain.
What if the answer is not to build more on the edges, but to reimagine what already stands at the core?
Research by Hassell for the Property Council of Australia and Ethos Urban identified 86 pre-1990 office buildings in Melbourne as suitable for adaptive reuse, with the potential to deliver up to 12,000 new homes and accommodate more than 20,000 residents. These are not fringe assets. They are centrally located structures with strong bones, generous floor plates, and direct access to public transport, retail, and culture.
The challenge is not only architectural or regulatory. It is conceptual. These buildings are not obsolete. They are paused.
From Workplaces to Living Places
The transition from office to residential use has often been viewed through a traditional apartment lens. But many of these buildings do not naturally lend themselves to conventional unit configurations. Window spacing, deep floor plates, and legacy core placements limit what can be economically achieved through standard apartment models.
This is where co-living becomes particularly relevant.
Co-living does not force these buildings to behave like new residential towers. Instead, it adapts to their inherent logic. It embraces shared kitchens, communal lounges, co-working spaces, and flexible room arrangements that align closely with old office layouts. Smaller private rooms combined with generous communal zones allow density without sacrificing experience.
In many ways, these buildings were already designed for shared occupation. The difference is the purpose. What once supported teams and departments can now support residents and communities.
Lessons from Overseas
This is not an untested idea. Cities facing similar conditions have begun reshaping vacant office stock into shared living environments, recognising that traditional apartment formats are not always the most effective solution.
In the UK, projects such as ROCO Residence in Liverpool demonstrate how former commercial office buildings can be transformed into purpose-built co-living environments, combining private rooms with shared kitchens, social lounges, co-working zones and rooftop terraces. Rather than treating conversion as compromise, these projects reposition shared living as an intentional urban lifestyle.
Across the United States and Europe, design-led studies and pilot projects have shown that adapting office buildings into co-living models can unlock significantly higher spatial efficiency, reduce conversion costs compared to traditional apartments, and deliver flexible housing options suited to single-person households and urban professionals.
These initiatives reveal a broader pattern. Co-living is not a fringe alternative. It is becoming one of the most structurally compatible models for reactivating obsolete office stock in dense city centres.
Investor Appeal: Stronger Economics, Lower Capital Exposure
From an investor standpoint, the economics of converting older office buildings into co-living rather than conventional apartments are increasingly compelling.
A major study by Gensler and The Pew Charitable Trusts found that co-living configurations can reduce conversion costs by approximately 25 percent to 35 percent per square metre compared with traditional office-to-apartment retrofits. This efficiency is achieved by concentrating high-cost infrastructure such as kitchens, bathrooms and wet services into shared zones, while allowing smaller private rooms to sit along the building perimeter where natural light already exists.
Translated for an Australian investment lens, the study modelled an average construction cost of approximately AUD $190,000 to $210,000 per co-living unit, compared with roughly AUD $460,000 to $520,000 per traditional studio apartment within comparable office-to-residential conversion scenarios. While these figures originate from US case studies, the relative differential provides valuable insight into the structural efficiency of co-living as a typology.
For investors, this creates several advantages:
- Lower capital deployed per delivered bed or unit
- Higher yield potential due to increased density efficiency
- Improved feasibility for older, underperforming commercial assets
- Ability to offer more affordable rentals while maintaining margin integrity
- Greater income resilience through diversified, room-level leasing structures.
In a market like Melbourne, where legacy office stock is increasingly trading at distressed or discounted valuations, this cost profile creates an opportunity to acquire underperforming commercial assets and reposition them into high-occupancy, income-generating co-living environments with stronger risk-adjusted returns than conventional apartment conversions.
While individual project feasibility will always depend on planning controls, build costs and financing structure, the evidence suggests that co-living offers a structurally more efficient pathway that balances social need with commercial viability.
Sustainability Beyond Symbolism
While housing demand is the visible driver, sustainability is the silent multiplier.
Adaptive reuse significantly reduces embodied carbon by preserving existing structures instead of demolishing them. The Hassell report highlights that keeping these buildings operational avoids the environmental damage associated with new construction, including material waste, landfill contribution, and carbon-intensive production cycles.
There is also a social sustainability argument. Housing people in central locations shortens commutes, strengthens local businesses, and reconnects residents with the cultural and economic heart of the city. Living becomes integrated with daily life, not pushed to the margins.
Co-living enhances this further by encouraging shared consumption of space and resources, reducing duplication and inefficiency.
Not Every Building, but the Right Buildings
Feasibility varies. Structural constraints, fire compliance, zoning conditions, ceiling heights, and services placement all determine whether a conversion is viable. The point is not that every office can become housing. The point is that many can, and those that can should be seriously considered before they fall further into decline.
Successful conversions require collaboration between planners, architects, developers, and operators who understand both the physical limitations and the social function of shared living. This is an operational mindset as much as it is a design one.
A New Urban Rhythm
The real opportunity is not just in delivering beds. It is in reshaping the pulse of the city.
When residential life returns to the CBD, cafés reopen, streets regain energy, and public spaces become more human. The city becomes lived-in rather than simply used. Activity extends beyond business hours. The centre becomes a neighbourhood again.
The first movers will not only adapt buildings. They will redefine what the post-pandemic city looks like.
Melbourne’s legacy towers are not failures of the past. They are the foundation of the next chapter.
The question is no longer whether this opportunity exists. It is who is prepared to recognise it as a residential asset rather than a commercial problem.
And whether we choose vacancy, or vitality.
