How city liveability is leading to real estate demand

Liveability, the measure of a city’s stability, sustainability, well-being and human experience offering is no longer just a lifestyle credential but a competitive attribute that is boosting tech industries, driving office occupancy and attracting real estate investment.

The correlation between cities’ quality of life and their economic and real estate performance is laid out in JLL research that evaluates cities including Austin, Barcelona, Berlin and Kuala Lumpur with the objective of uncovering how Melbourne – the number 4 ranked city in the 2025/2026 Economist Intelligence Unit's Global Liveability Index – measures up.

JLL's Benchmarking Melbourne 2026 – A Global Context puts a commercial property lens on each of the cities, showing how policy, talent and infrastructure intersect with property performance.

"Melbourne, which is feted in the Economist’s liveability index for its healthcare and education, is attracting investment capital and occupier interest, says Kate Pilgrim, managing director and joint head of Tenant Representation, Victoria, JLL.

“Of the 10 cities analysed in the report, Melbourne had the second highest volume of real estate transactions in 2025, with industrial and retail accounting for 67%. Plus, nearly a third of the population remains in the crucial 20-39 age bracket through to 2035. That's the talent pipeline growth sectors need and the reason it continues to draw investment despite near-term headwinds," Pilgrim says. 

The JLL report, which builds on a benchmarking report released by Committee for Melbourne in December 2025, compares cities that can illuminate a different aspect of Melbourne's competitive position and future potential.

Consider Austin, Texas. The city's office vacancy sits at historically elevated levels, yet technology companies drove 30 per cent of total leasing volumes in 2025. Tech occupiers represent 44 per cent of current space requirements and signed the three largest deals in Q4 2025.

"Austin shows that vacancy alone is no longer the headline metric. What matters is who is driving demand," Pilgrim says. "In Melbourne, we are seeing similar signals from technology-led occupiers, particularly those linked to digital services and data infrastructure."

Melbourne shares Austin's strong education ecosystem and talent pipeline. The difference lies in scale. Austin's tech sector has achieved critical mass, insulating it from broader market headwinds. Melbourne has the ingredients but has yet to fully capitalise on them. 

Barcelona, ranked Spain's most liveable city in 2026, placed 33rd globally in the 2025 Global Startup Ecosystem Index. Over the same period, office vacancy improved 171 basis points.

It’s a pattern that reinforces the pull of liveability as an economic driver in that it attracts skilled workers, which draws startups and capital, which creates office demand. 

"Liveability is often discussed as a lifestyle issue, but in practice it plays a big role in where skilled people choose to live and work," Pilgrim says. "Melbourne's ability to attract and retain talent continues to support sectors such as technology, professional services and other knowledge-based industries."

Kuala Lumpur's experience with expanded taxation frameworks offers relevant insights. After sales and services tax was extended to cover leasing and construction, commercial property sales volumes fell 68% between 2024 and 2025. Construction costs rose 3%, flowing through to fit-out expenses and rents.

"Policy settings sit alongside fundamentals like demand, supply and long-term growth when investors assess opportunities," Pilgrim notes. "In Melbourne, those fundamentals remain strong and investors are watching how the market and regulatory landscape evolve over the medium term."

Despite these crosscurrents, JLL's analysis positions Melbourne favourably. The city's offices are affordable by global standards and property investment has persisted through 2025, particularly in the industrial and logistics sector and the retail sector. 

The challenge now is execution, Pilgrim says. “Melbourne has the liveability credentials and demographic fundamentals to compete on a global scale. We are seeing this reflected in ongoing interest from the professional services sector, which has led CBD demand and the rebound in net absorption across 2025. Contraction is forecast for 2026, but the challenge will be to continue converting quality of life into the economic gains that define the next generation of competitive cities.”