The strength of demand for Melbourne's office market will keep vacancy down amidst an influx of new supply across the next few years, according to JLL.

The firm's Q3 Office Market Commentary for the city's CBD has revealed headline vacancy has declined to 3.7 per cent, meaning Melbourne remains thE tightest CBD market in the country.

While report notes there are nine projects under construction in the city which are expected to deliver 433,700 square metres of space through to early 2022, it says strength of the pre-commitment market will limit the impact of the new supply on vacancy rates.

At a glance:

• JLL has released its Melbourne CBD Office Market Commentary for Q3 2019, revealing headline vacancy has decreased to 3.7 per cent.
• Prime yields for the CBD remained stable throughout the third quarter, while secondary yield range decompressed by 12.5 bps at the lower end, bringing the range into 4.63-5.57 per cent.
• While there are nine projects under construction in the city, JLL believes the strength of the pre-commitment market will limit the impact of the new supply on vacancy rates.

"With an uptick in project completions at the start of next year, we expect that we are at the bottom of the vacancy compression cycle," the report said.

"Ongoing robust demand should keep the decompression relatively modest and vacancy is not expected to substantially exceed its 10-year average (7.6 per cent) through this supply cycle- peaking at about 8.5 per cent in 2024."

According to JLL, prime yields for the CBD remained stable throughout the third quarter, while secondary yield range decompressed by 12.5 bps at the lower end, bringing the range into 4.63-5.57 per cent.

Looking ahead, the research firm believes yield decompression is not imminent.

"Yields have been broadly assumed to be at or near the end of their compression cycle for almost a year," the report said.

"However, with the ongoing weight of incoming capital in the market, and a lack of liquidity in investor grade stock, there is an expectation of minor further compression over the rest of 2019 and into 2020, and decompression is not expected until 2022."

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