How Will COVID Affect CBD Office Vacancy Rates?

IN LATE JANUARY, the Property Council of Australia released its 6-monthly summary of CBD vacancy rates around Australia.

And not surprisingly, there has been an increase across the board – following a slow return of office work, as a result of COVID.

However, it’s worth noting that most of the increase in vacancies has been due to tenants looking to sublease space, for which they still have an ongoing commitment.

Moreover, a balanced CBD market generally needs a 6% to 8% vacancy rate – purely to retain some equilibrium between landlords and tenants. Therefore, both Sydney (at 8.6%) and Melbourne (at 8.2%) are actually well-positioned moving forward.

At the moment, some employees are choosing to continue working from home – given the periodic flareup of new cases occurring from city to city.

However, once the vaccine rollout gets fully underway, you’ll begin to see greater certainty returning to the employment market.

And while there may be some employees (say, around 20%) who may elect to work from home for at least part of each week … the remaining workforce will need to be accommodated within a larger footprint – because of the social distancing requirements.

Things will settle down

Of course, there will need to be a period of adjustment following the pandemic.

However, once the dust settles over the next year or so, you can expect to see CBD occupancy rates head back towards pre-COVID levels.

That said, some firms may choose to relocate holder visions out into the suburbs – mainly to encourage workers back to the office, by reducing the dreaded morning and evening commute.

Bottom Line: While suburban office markets will be the clear winners, CBD markets are not likely to collapse as some have been suggesting.

Instead, as building owners and tenants, you will simply need to become more creative (and responsive) in meeting the changing requirements of your workers.

Speak Your Mind