While there were initial fears about a crashing real estate market and stock market in the pandemic’s early days, Australia has in reality been faring relatively well. So more specifically, how have demand and expectations changed when it comes to commercial property in Sydney?
Commercial property’s wild ride in 2020
Mid 2020 saw some significant changes for commercial property as workforces nestled into remote working and sourdough starters. March to July saw a particular slump as lockdown was in full force, with transactions down by half from the year before. As restrictions eased and Sydneysiders returned to a more social environment, these figures have been improving over time but are still not at pre-pandemic confidence. The Property Council of Australia’s Office Market Report shows the office vacancy rate in Australia’s CBDs increased from 9.2% to 11.1% in the 6 months to January 2021 – the highest rise since early 2015. Sydney’s CBD vacancy rate rose from 5.6% to 8.6% in this time, showing that there is still pressure within this market.
So what’s ahead in 2021?
What’s changing in commercial real estate?
While the pandemic has had plenty of experts predicting the end of office life, it’s become clear that there will still be value in a social, physical workplace for many companies. What we are seeing is more demand for flexible spaces and flexible arrangements as businesses adapt to changing circumstances. Green spaces and breakout spaces are becoming more important as the focus on health and wellbeing grows. It’s also fair to expect that many businesses will be looking to diversify their offerings to survive the ever-changing conditions. This could mean everything from a restaurant offering takeaway options where they didn’t before, to an office space becoming home to micro-studios or coworking zones with a built-in café. There could also be a move away from strictly CBD locations out to more lifestyle-based areas – Bondi Junction being one of those areas.
With its typically longer leases, benefits for Australian tax rates and relatively higher rental yields, commercial property will no doubt still be seen as a solid investment option moving forward. As with anything in 2020 and 2021, it’s going to be all about flexibility and adapting to the times while sticking with the principles of quality investments.
Key features to look for in commercial property, whether buying or renting
- Location and proximity to busy centres
- Foot traffic and frontage for retail businesses – and is it easy to park close by for customers?
- Flexibility of the space – can it be broken into smaller spaces or fitted out as needed?
- A well maintained and attractive aesthetic, which matters for customers, staff and tenant. Remember there can be investment property tax benefits for many ownership expenses.
- Appropriate amenities, such as staff parking, bathrooms and green spaces.
- Sustainable property measures such as LED lighting, skylights or solar panels. These features are becoming increasingly popular with tenants.
Wills Property provides real estate services and property management in Bondi Junction, and we’ve been operating in the local area for over 90 years. For truly experienced support whether you’re selling, buying or leasing commercial property, get in touch with the team today.