After a widespread national lockdown in early 2020, Covid-19 has had a varied and fragmented impact on Australia’s commercial property market, with restriction levels varying dramatically between states.
Throughout such a volatile time, innovation and adaptation have emerged as key pillars of success for businesses within these commercial property sectors, according to Re-Leased, a cloud-based property management software solution for commercial, industrial, office, retail and mixed assets.
With the external environment shifting daily, landlords who had the upper hand were those armed with real-time data that gave them a clear picture of the market.
While the commercial real estate sector has traditionally been slow in the uptake of real-time data to guide their business decision-making, property professionals are beginning to realise that this information is a powerful tool to gain a competitive advantage.
During the past few years, the changing needs of tenants have been prominently exposed in the office sector.
A growing number of office workers no longer wish to work in an office full-time, which has increased the demand for flexible workspaces, shorter lease terms and tech-enabled fit-outs.
This trend was accelerated dramatically during 2020, as businesses were forced to set up the infrastructure that allowed their employees to work efficiently from their homes.
As tenant’s found it more difficult to access their premises, rent-collection rates fell across Australia and rent-relief subsidies increased as landlords tried to keep them on board.
While rent collection is just now returning to pre-Covid-19 levels, a longer-term trend that we are likely to observe is the demand for shorter lease terms.
Tenants are taking with them the lessons from 2020, pursuing greater flexibility and protection for their business.
Securing long-term leases of 10-plus years has traditionally been a key indicator of success for property professionals across Australia. However, these investors will now have to reconsider how they evaluate the performance of their property portfolios and pivot their product offerings.
Co-working spaces are a great example of how demand for shorter lease terms is changing the market for office landlords.
Initially, this business model was hit hard, as tenants took advantage of their short leases and dropped their flexible workspaces as soon as Covid-19 hit.
However, it is this same model that is best set up to offer businesses more flexible leases in the future and meet this growing demand.
More established commercial landlords will have the right amenities and assets in place to offer flexible lease terms to larger companies, which will see them grow in popularity.
An industry that has performed consistently well during Covid-19 has been Australia’s growing industrial sector. Industrial property is currently undergoing a phase of unprecedented expansion and digital transformation, driven by the rise of e-commerce.
This growth was accelerated by online shopping demand throughout 2020, as shoppers were restricted from attending brick-and-mortar retail stores.
As industrial assets become increasingly high-tech and integrate artificial intelligence to optimise manufacturing capability, these opportunities will only expand further.
In 2021 and beyond, industrial assets are likely to rise in value and attract investment from landlords looking to diversify their portfolio.
This means that harnessing real-time data has never been so important for industrial property landlords, to keep up with this rapidly transforming landscape.
It is clear that as Australia rebounds from the events of 2020, the commercial property professionals who will prosper in our new normal will be those who are flexible and agile in their approach, and those who choose to arm themselves with the data-driven tools necessary to make informed and strategic decisions.
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