The Covid pandemic began in early 2020, delivering one of the largest shocks the world has had in a while. Three arms of commercial real estate, office, industrial, and retail, were all severely impacted. Lockdowns left offices and shops appearing like a post-apocalyptic world, while industrial simply couldn’t keep up with the demand.
Several years have passed, so where are we now?
Perth offices are anything but languishing
Crisp white collars, a dash of merino wool, and modern glass cathedrals were the staples of corporate life.
Working from home and video calls were simply not part of the lexicon.
Enter the stage left, the pandemic.
While essential workers could head to their places of employment, offices reverted to untamed, baron, concrete jungles; turning up would leave you with a fine, and maybe worse.
Managers, employers, and business owners had to quickly pivot in order to continue operating and find themselves a new normal.
“The last few years have marked a challenging period for Australia’s office sector, with the pandemic-related lockdowns and shifts towards remote working resulting in low office attendance,” said Westbridge Funds Management’s Damian Collins.
“This led to many businesses reconsidering how much space they needed in the longer term. With the potential for higher vacancy ahead, the office market largely fell out of favour with investors.”
While other Australian cities continued to see offices languish with long Covid, Perth has turned the corner.
“In Perth, data from the Property Council of Australia (PCA) shows that average daily attendance rates have already bounced back to as high as 80% compared to markets like Sydney and Melbourne that struggle to get this number up to 60%,” said Collins.
“At the same time, we have seen limited new construction in some sub-segments of the market.”
As the cities hustled and bustled once more, the race for A-grade office space began. The reason: luring employees back into the office.
Alas, fewer new office developments are in the pipeline, meaning that while demand grows, supply will dwindle.
“This combination of strong demand from tenants for high-quality office space and the limited new supply expected in 2024/25 will encourage modest rental growth and lower vacancy in the coming years, presenting an attractive countercyclical opportunity in the CBD office market in the medium-term,” Collins concluded.
The boons seen across the pandemic have been widely covered, however, SVN head of agency, Rocco Demaio, said it is a familiar story.
Compared to the 1990s, when stock was also limited, outer suburbs like Wangara and Malaga saw demand jump, leading to the developments and industrial zones we are familiar with today.
With stock limited once again, developments are likely to be further out in Rockingham and Port Kennedy, to the south, and Butler and Bullsbrook, to the north.