Office vacancies in the Sydney central business district (CBD) have fallen to their lowest level for five years but Melbourne still faces a glut of space and no immediate signs of recovery. The latest vacancy report from the Property Council of Australia - formerly the Building Owners and Managers Association - shows Sydney vacancies at 10.4 per cent in July, down from 11.6 per cent in January. The January figure was almost half the 1993 high of 22.2 per cent. In Melbourne the July vacancy rate remained at 22.5 per cent, up from January's 21.8 per cent, which was also an increase on the previous six months. Frank Gelber, director and chief economist for forecasters BIS Shrapnel, has predicted Melbourne will continue to face an oversupply, with little likelihood of recovery in the next three to four years. Mr Gelber said the delay in upswing was caused by a combination of weak demand and a good supply of quality space. The Property Council report showed 8.30 million square feet of vacant stock in the Melbourne CBD, compared with 4.67 million sq ft in Sydney. 'Given the lead time for new construction, it is already too late in some cities, notably Sydney, to prevent an under-supply of office space towards the end of the decade,' Mr Gelber said. He said Sydney rents and property values were currently too low to convince financiers new projects were viable. Declining vacancies and lack of new supply until late 1998, with only one development due for completion later this year, should mean continued rent rises for premium property, the council predicted. The report showed relatively low vacancy levels in Canberra, at 5.9 per cent, and Hobart, at 7.0 per cent, with Brisbane at 10.6 per cent and central Adelaide at 19.5 per cent. The Gold Coast rate was 16.9 per cent. Perth continued its recovery, the vacancy rate falling to 14.2 per cent from 16.8 per cent in January. January's figure was a five-year low and almost half its 1993 high of 31.6 per cent.