Commercial Property Market Summary ~ March 2020 - January 2021
How was the local commercial property market impacted during Covid-19 and how are we looking today?
Many are pleased to see the end of 2020 as plenty of business owners and investors agree it was the most challenging of years.
Although it had begun with high expectations, by the time March came around, many business owners and investors found themselves adjusting their plans and goals for the following quarter.
Surprisingly and thankfully, the year finished with signs of strong market conditions across all our property sectors, including retail property.
We are pleased to report the large surge in tenant and buyer activity for the latter months of 2020 continued through the opening month of 2021.
Enclosed, a summary of our findings for 2020 in the commercial, industrial, and retail property markets, as well as our thoughts for 2021.
March and April 2020 It should be no surprise that these were the worst performing months for us in 2020.
COVID-19 media releases, lockdowns, and the stock market crash sent shockwaves throughout the Australian economy. As a consequence, many tenants and buyers decided to put their property buying, selling and leasing decisions on hold. At one point, it really felt like someone had disconnected the phones!
Over 12 deals agreed for the month of January and February with only four deals going through to completion, of which two had to be renegotiated.
May, June & July
The month of May saw a small amount of activity return, primarily from businesses looking to relocate for the purpose of downsizing. Very little sale enquiry from owner occupiers or investors presented during the month.
With many grey areas in the National Cabinet Code and uncertainty as to its effect on small business and property investors, many decided to sit on their hands.
Again, we experienced additional negotiations falling over due to the market uncertainty, with some scenarios of landlords and sellers withdrawing with the view they had given away too many concessions, and the hope for market improvements with new government grants on the horizon.
June and July were somewhat of an improvement from May. Many of the enquiries were for warehouse style properties, and although we had some enquiries for commercial office space, approximately half of that from industrial, and mostly for cheaper B and C grade offices i.e. older office buildings or outside of key commercial areas.
August, September & October
In August and September, it became evident that many tenants and buyers who put prior decisions on hold had decided to "bite the bullet" and transact. A welcoming influx of offers resulted in many happy owners as vacant properties were now receiving commitments, albeit with slightly more aggressive offers including additional rent free, on average one month more than would have normally been approved. Some owners were also willing to accept shorter lease terms i.e. 1-2 years verses our normal 3-5 years.
August also encountered the commitment of several investment properties, with a total of several deposits received on properties offering yields of 5% net return as investors sought a more stable source of income from bricks and mortar.
September and October saw a sizeable increase in demand for showroom space from home improvement companies seeking to open in second or third locations or obtain a larger space. Feedback from well-known national home improvement brands noted that homeowners experiencing longer periods of time at home and extra cash due to travel restrictions often invested instead in household items such as new timber floors, lounge suites or a new big-screen TV.
November & December
November and December were by far the most impressive we had seen in a long while. Enquiry was strong and tenants were targeting well priced properties. It was like Covid-19 had not existed at all.
Again, stronger demand was evident in the warehouse/ industrial property segments, however the retail sector was a welcome surprise with increased enquiries and transactions in food & beverage, as well as services such as hair & beauty, real estate, mortgage brokers, ‘wellness’ and even the return of fitness centres - all seeking ground floor properties with exposure.
January and 2021 prediction
After a short break, we returned to a surge of email enquiry, more than normally received over the equivalent period. This could also be the result of the restrictions on travel and the poor weather, as many were left indoors and therefore spent longer online over the festive season.
A pleasant increase in demand for quality office space has emerged with many professional businesses seeking A and B grade office space, only to be surprised with very few available properties to inspect.
It does appear the 2020 concept of working remotely is now in the past as business and interaction and collaboration in the flesh.
With property stock drying up completely we now predict incentives dropping and even the possibility of some rent increases.
We are fortunate in Australia to be able to experience such strong market conditions despite troubles in other parts of the world.
We predict that the remainder of 2021 will remain as strong as January.
Should you have a property you wish to lease or sell now, or in the near future please call our specialist commercial team today.