Social Distancing Is The New Norm: COVID- 19 Impact On Commercial Real Estate

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Social Distancing Is The New Norm: COVID- 19 Impact On Commercial Real Estate
Social Distancing Is The New Norm: COVID- 19 Impact On Commercial Real Estate

The enormity of the spread of the novel coronavirus has taken everyone by surprise. Countries like the UK, US, Italy and France are suffering severe human and economic crisis due to the pandemic, which has engulfed the entire world in its deadly claws. As soon as the cases started emerging in Australia, our government sprung into action and imposed the precautionary measures of social distancing and lockdown.

International travel has been stalled, and most of the workforce in the country is operating from homes. The impact of COVID-19 was felt most in the densely populated city of Sydney, which is home to various businesses. Naturally, most property managers are concerned about the struggling economy, loss of jobs and consumer uncertainty. However, experts suggest that commercial real estate in Sydney will not be affected too much.

Since the sector was in a stable position before the virus attacked the world, there are scant chances of a significant downturn. Also, the transactions have been continuing even when social distancing has become the new norm. So let us understand how things will unfold for the sector in this COVID-19 affected world.

 

How The Rental Income Will Be Affected?

With the unemployment numbers increasing in the country, the Federal Government decided to pull back the quarantine restrictions and bring the economy back on track. Restaurants, cafes, bars were opened in Sydney on 15th May, and the number of patrons coming out to socialise was more than satisfactory.

However, they have been asked to maintain strict social distancing measures. The workplaces are also opening up, and many companies are trying to move back into the bustling CBD. However, companies are sceptical that occupancy will be reduced significantly post COVID-19 as businesses have found a new way of working remotely.

However, they will still need a physical office to meet clients and conduct business meets. Thus they will not be willing to give up on their strategic spots. Most of the large enterprises have been paying the rent. The small entities which have been adversely affected by the pandemic are finding it hard to pay their monthly bills, but they have been saved through lease negotiations and commercial lease support offered by the government. 

 

Transactions Are Showing A Positive Sign

The record low-interest rates announced by the RBA to avoid recession are going to stay the same until the jobs come back into the market. Also, the government is offering funds to get more capital in the construction industry and rejuvenate new developments and projects in Sydney, which had been stopped for a few months.

However, it can be viewed as a silver lining as the delay in construction will not lead to an oversupply. Also, the low rates have improved the confidence of investors who are viewing commercial assets as a viable investment opportunity. Thus buying and selling a commercial property during COVID-19 hasn’t been affected negatively. Also, the commercial market has not witnessed price fluctuations like the housing sector in the past few years.

The mortgage holders will benefit from the rate cut, and the buyers will be willing to shell out the dollars to get the best prices right now. The vacancy level may increase due to remote working and social distancing coming into the picture. Still, the long-term effect of COVID-19 on vacancy rates will not be immense as the Sydney office market has been protected by tight vacancy and solid rental growth for a long time now. Thus it may be too soon to comment on the impact on the future of the commercial property sector as of now.

 

The Downside of the Impact of COVID-19

The shared office spaces, which had become quite popular lately, may lose their sheen in the new working environment, which mandates maintaining physical distance from one another. So many new concepts that had mushroomed for co-working may have to take a back seat, and new office designs with six-feet-apart workstations may begin shaping up. Another negative impact of the pandemic is that the Chinese investors will not be visible anytime soon in the market.

The industry will be missing the capital that flows from offshore considerably as the prices had held a strong position due to the support of Chinese investors. Also, the Australian government has announced that all Chinese investments in the country will be scrutinised thoroughly regardless of the value of the deal.     

 

Social Distancing Being Utilised By Estate Agents

Virtual tours and online auctions have come into practice in the real estate sector ever since coronavirus started spreading its fangs into Sydney. The property managers are also offering personal inspection tours to buyers to maintain physical distancing for COVID-19. However, most investors are happy with the virtual tours as they do not have to live in these properties. They are only putting their money into them for investment purposes.

They are arranging negotiations for sale and lease via video calls and utilising 3D showcases of the properties to get an idea of the proposed constructions and projects. Many are using FaceTime walkthroughs to take the buyers through the surroundings and get an idea of the dimensions and environment of the workspace.    

 

Physical Distancing in Workplaces

While the IT sector has managed to stay at home and continue being productive, the situation is not the same for other domains which have to meet customers. Many employees have been reporting to work in the city of Sydney, such as media personnel, banking professionals, insurance providers, call centre executives, scientific professionals, medical staff and more. Safe Work Australia has issued safe workplace principles for offices which have been operational and will continue to work in the coming months.

Thus many workplaces are coming back into action while adhering to the guidelines of safety offered by the government. The easing of the lockdown will bring the workforce back to their offices as businesses plan to come out of the financially distressing times and move forward with safety.

 

Conclusion

Although businesses are struggling and the economy is showing a downward trend, the stimulus packages injected by the government will help in reviving the financial stability. Thus if you are looking for commercial property for sale or lease in Sydney, then you can make use of the rate-cut and government relief packages to stay away from the impact of COVID-19. 

Author Info Sophie Barrett

Sophie Barrett is an experienced real estate marketing professional with a specialisation in commercial property market. She has a Masters degree in marketing from the esteemed Melbourne Business School and has several property management certificates to her credit. Her shrewd marketing policies and business acumen have led to the most rewarding property deals in the major capital cities of Melbourne, Sydney and Perth. She is a popular name in the real estate market and has been serving the industry for almost two decades now. CommercialProperty2Sell is proud to partner with her for some astute discussions and advice on the booming sector.  

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