Covid-19 has undoubtedly proved a major shock for Sydney’s commercial property market, with the city’s strong position at the start of the year significantly undermined by the pandemic.
While the year to March saw the vacancy rates at near record lows, especially for primary properties, vacancy rates saw a dramatic increase as major tenants put space back on the market; nearly a million square feet were made available between March and July.
This space may take time to refill. Many white-collar firms have been forced to rethink their home-working and flexi-time policies as a result of Covid-19, and the potential reductions in cost that a smaller footprint could mean will not have escaped the attention of CEOs desperate to balance the books.
However, the picture is not entirely negative. The strong fundamentals that preceded the pandemic mean that Sydney is better equipped to deal with a shock like this than other major centres in Australia. While companies will certainly look to optimise their space in coming years, there may well be a rise in flexible working offices once some degree of certainty has returned to the market; working from home does not suit everyone, and flex-space may well make up a significant proportion of the new office landscape. Finally, it is worth remembering that Australia has dealt with the pandemic relatively competently compared to many other major economies. This positive perception could entice tourism, migration and overseas investment, a triumvirate that has served the city’s commercial property market well in the past.