Did COVID-19 change the commercial property market… forever?
The pandemic changed many people’s lives for the better and worse. Whilst not directly impacting many markets, the indirect impacts of COVID-19 often had major consequences for people and industries.
In this article, we will be showcasing the range of things that happened to the commercial property market due to this outbreak.
The pandemic caused many businesses to close or operate with reduced capacity, this resulted in a decrease in demand for commercial real estate. Many companies downsized their office space or even chose to work remotely now.
Delayed or Cancelled Transactions
The uncertainty caused by the pandemic initially led many investors to delay or cancel commercial property transactions, resulting in a slowdown in the market. The Reserve Bank responded by reducing interest rates to stimulate transaction activity, which led to a sharp spike in values within a short period of time. The long-term impacts of economic stimulation are yet to be fully understood in a commercial property context, but we are seeing values soften since interest rates have begun increasing.
The pandemic has also led to an increased demand for flexibility in commercial property leases, as many businesses now require more flexible working arrangements. This has led to a rise in short-term lease agreements, co-working spaces, and shared office spaces.
Shift in Tenant Priorities
Tenants are now prioritising health and safety in their choice of commercial properties, with features like touchless access, improved ventilation, and increased cleaning becoming important considerations.
Acceleration of Technology Adoption
The pandemic has also accelerated the adoption of technology in commercial properties, with many businesses investing in digital communication and remote working tools. This has resulted in a shift in the design and functionality of commercial properties to accommodate these changes.
Although most these effects weren’t everlasting, it was definitely a major wake up call for commercial property investors, that the property market isn’t always too safe. Although with this being said, the COVID-19 pandemic did accelerate technology adoption. This shows the quick adaptation and evolution that can take place within markets.