Commercial real estate finds its groove again post-COVID

Like almost every sector of the economy, commercial real estate took a big hit in 2020, but industry leaders say confidence is back and growing by the day.

While local market factors remain a key driver of price and demand, across the commercial sales and leasing spheres, negative sentiment built up during a tumultuous 2020 is being replaced with buoyance, according to two winners of the prestigious Annual REA Excellence Awards – known as the AREAs.

Novak Properties’ Michael Burgio, who took out the AREA for top commercial sales agent for NSW and the ACT, said the market on Sydney’s northern beaches essentially paused last year.

“Where we’d normally see up to 20 sales above the $2 million mark in 12 months, last year we saw just five. It was a big hit,” he said.

“So when people wondered if the market was up or down, it was just on pause I believe, because with such a low number of sales – and with those sales having little correlation to each other – it wasn’t possible to draw a trend line,” he said.

Mr Burgio said buyers were rightly worried about the potential risk of not being able to earn income off a purchased premises if another COVID lockdown was announced – as happened in March and then December in Sydney and more recently in June in Melbourne.

“It can be a great property and, say, 7% return is a great return, but if you’re shut down, the return is nothing, zero. So, naturally those concerns crushed sentiment.

“But now we are certainly coming out of that and sentiment and confidence is returning for sure. Whereas in November maybe 80% of potential buyers were raising those COVID concerns, now it’s more like 10%. There has been a huge drop-off in that and that’s translating into good sales.

“I made more sales in April than all of last year combined. The market is surging and I expect that to continue until the international border is opened again,” Mr Burgio said.

The AREAs, sponsored by REA Group the publisher of this website, are annual awards that recognise the professional achievements of agents, according to REA Group chief sales officer Kul Singh.

“The AREAs focus on recognising and celebrating the success of real estate professionals in the property industry. Through recognising outstanding achievements, we are able to play a role in educating the market on who the top performing agents are and assist those consumers on their property journey in selecting the best and most suited agent,” Mr Singh said.

Mr Singh said the resilience shown throughout the industry over the past 18 months has been remarkable.

“Undoubtedly, the pandemic challenged us all, both professionally and personally. Like so many industries, real estate professionals were required to adapt quickly to the change in conditions. It was through these challenging conditions that we saw fast-tracked innovation and great opportunities for growth – taking excellence to a whole new level,” he said.

Saxon Smith , a sales and leasing consultant with McGees Property in Adelaide who won the top commercial leasing agent AREA for South Australia, said the bounce in his city started earlier than on the eastern seaboard.

“From March to maybe May last year, the market was completely dead, but we saw that change as early as June and July (of 2020). Within a few months of coming out of that lockdown, the market was absolutely pumping Adelaide was fortunate in that way,” Mr Smith said.

“Right now, there’s probably less vacancy in (commercial spaces) in Adelaide than I’ve ever experienced. There’s really good confidence out there.”

Leasing conditions in Adelaide are tough at the moment, Mr Smith said. Picture: Getty

But not all sectors are flying, Mr Smith said.

“The office leasing market in the Adelaide CBD is tough, that’s because there are still a lot of businesses coming to grips with the new ways of working and how they can use working from home. That means some are sceptical about signing a new long-term office lease.”

Retail and industrial are both very strong, he added.

Mr Singh said the uneven recovery and ongoing economic uncertainty the pandemic created has led many in the industry to change the way they do business for the better.

“The onset of COVID-19 brought with it the opportunity to innovate at a rapid rate. Adapting to new market conditions and a changed landscape saw the speedy introduction of new digital tools, video platforms for tours and online features to evolve the consumer experience, ultimately ensuring we meet the ongoing needs of our audience,” he said.