Despite occupancy rates of Sydney and Melbourne offices dropping below 10 percent as a result of lockdowns, a number of landlords are continuing to invest in the state capitals in one of the biggest selling seasons both cities have seen in years.
Landlords with vast portfolios are looking beyond the pandemic, with international investors such as the Singaporean-based CapitaLand snapping up commercial properties that have gone on sale in the recent past. Dexus and Investa both hold a number of buildings set to hit the market in the coming weeks, with Alfasi joining the influx, selling half a state in its new $250 million tower in Melbourne.
Despite many companies adopting hybrid home-office work models, landlords believe that there is still a desire for office space. This is backed by the number of properties picked up in recent sales. Melbourne’s Deague Group recently sold a property on the fringes of the garden city to Centuria Capital for $205 million, while purchasing an Adelaide office building for $63 million.
The Property Council of Australia’s Chief Executive Ken Morrison says he expects occupancy rates to increase significantly in the CBDs when heavy restrictions pass.
“Our CBDs support millions of jobs and generate hundreds of billions of dollars in economic activity,” he says in an interview with The Daily Telegraph.
“We know that lockdowns are having a big impact on our CBDs, but it is encouraging to see that once lockdowns are lifted workers are returning at faster rates than we recorded in 2020.”
Morrison goes on to say the delta variant has thrown a number of unique curveballs in the state capitals.
“The recent delta outbreaks have not impacted all cities equally and have created two distinct challenges across our city centres,” he says.
“For the capitals that have been less affected, we need to find a way of enticing workers to increase their number of days in the office.”
“Once we’ve overcome the immediate threats to public health, it is critical that building owners and employers work together with all levels of government to get our CBDs firing on all cylinders once again.”
A recent occupancy survey conducted by the Council indicates that the occupancy level of the Sydney CBD currently sits at 4 percent compared to pre-Covid levels, with Melbourne reporting a total of 7 percent. Canberra’s occupancy rates have plummeted exponentially in the space of a month, from 73 percent to 8 percent of pre-Covid levels. Brisbane and Adelaide’s CBDs are currently sitting at 60 and 65 percent occupancy. CBD office occupancy levels are not expected to return to a higher level in Sydney, Melbourne and Canberra for at least another three months.