THE majority of office tenants across Australia’s eastern seaboard put their leasing requirements on ice during March and April, with 65% in Melbourne freezing their plans, as the coronavirus pandemic made its impact felt on the property market.
According to Knight Frank research, 42% of office leasing mandates were halted in March and April, and 11% opted to stay put or cancel their requirement.
Enquiry and inspections increased during May, particularly in New South Wales and at the smaller end of the market.
Brisbane has the lowest amount of leasing mandates on hold, with 30% of mandates put on ice due to COVID-19. This compares to 36% in Sydney and 65% in Melbourne.
The tech sector shown with greater numbers progressing with requirements, as well as those in healthcare and social services. Professional services tenants appear to be delaying decision making.
Knight Frank chief economist Ben Burston said COVID-19 had resulted in a significant slowing in leasing market momentum, with enquiry lower. Incentives are rising in most markets, with flexibility over lease commencement dates common.
“COVID-19 has come as a huge shock to business and most are understandably focussed on operational issues and maintaining cash flow during a challenging time, and making decisions on their real estate is not an immediate priority.
“While businesses with an immediate requirement for space will proceed with their plans, others are preferring to wait until the virus is contained before agreeing to new lease commitments.
“At a sectoral level, the early evidence suggests that office demand from businesses in the tech sector has been more resilient, and also from those in healthcare and pharmaceuticals.”
Knight Frank believes an uptick in activity is generally occurring at the smaller end of the market, for requirements of around 200 to 400 sqm, but any significant enquiry is generally on hold, even if a renewal is imminent.