The stunning city of Melbourne is one of the most sought-after destinations in the world. However, currently, it is reeling under the pressure of dealing with the COVID-19 pandemic. The virus has been spreading in Victoria at a fast pace with over 3700 cases being reported in a week. To restrain the contagion, Victorian Premier Daniel Andrews announced Stage 4 lockdown for metropolitan Melbourne with the overnight curfew.
The lockdown has come into effect from August 2 and will last for six weeks to restrict community transmission. Naturally, property experts are concerned about the impact of this shutdown on commercial real estate in Melbourne. The property managers and agents will have to keep their offices shut, but can work remotely to manage enquiries from buyers and get properties listed for sellers.
The unprecedented times have changed the functioning of the industry for the time being. Let us understand how it will affect the sector from a broader perspective.
What Happens In Stage 4 Lockdown?
The stage 4 lockdown imposed in metropolitan Melbourne restricts the moving out of the residents except for work, care giving, exercise and buying essentials. Melbournians cannot go beyond the 5km radius from their homes and have to follow the night curfew, which lasts from 8 pm to 5 am. If a household needs essential supplies, then only one person from the family can go out while wearing a mask.
Most businesses will remain closed except for essential services. Some services have been allowed to operate with contactless deliveries and online transactions, such as retail stores. However, they will not be allowing customers to step inside their stores. The construction industry has been allowed to operate with safety plans in place and reduced staff.
Thus the development work will continue but at a slower pace than expected, and supply for 2021 will be pushed forward. Real estate services have not been permitted to operate from their workplaces. However, all the property settlement and end of lease services will continue.
Thus property owners can get pest inspections conducted and get their assets valued during the six-week period. However, private inspections of properties for rent or sale have not been allowed in Melbourne yet.
Restrictions on Commercial Real Estate Sector in Melbourne
Since the physical inspections have been restricted, potential buyers who are waiting to grab commercial properties for sale and lease will have to wait. It is a known fact that a virtual tour will not satisfy the buyer as much as a quick private inspection with all the safety measures in place.
Although the Real Estate Institute of Victoria has been trying to change the state government’s stand on physical inspections, nothing concrete has resulted from their efforts yet. However, REIV is hopeful that they will be able to get it sanctioned.
Meanwhile, the Victorian government has suggested that if a lease has been finalised by the tenant and the bond has been paid, then they can move into the property by collecting the keys through a contactless delivery system. The property manager can unlock the premises and leave the keys inside so that the tenants can relocate without any hassles during the lockdown and avoid any disputes with the landlord.
End of Lease Repair and Inspections Are Allowed
The real estate agents can get the properties cleaned and inspected for pests. The properties can also be restored if they need urgent repairs and the agents can prepare condition reports. Tenants can hire professional end of lease cleaners in Melbourne to get their bond back if they are moving out. Renovations can only be carried out if the tenant has moved out or the property is vacant.
Otherwise, only urgent repair work is allowed. Landscaping can be done only if there is an urgent need for it. For example, an overgrown hedge or fallen tree which is restricting movement can be removed with the help of professionals. Property valuations can be carried out virtually and the insurance assessor should also work remotely.
Some of the auctions that were planned during these weeks in Melbourne have been moved online while other sellers have decided to postpone the auction. Since the real estate agents cannot auction from their offices, they will have to auction from the seller’s property, which has created confusion and thus withdrawal. However, the first week of lockdown witnessed a 60% clearance rate.
How Will The Sector Look Post The Lockdown?
The vacancy rate has increased in the Melbourne CBD as several businesses have opted to work from home. Many have shifted base to regional Victoria to stay safe from the bustling crowds. Once the restrictions are eased, the demand will go up in the retail and hospitality sector as people will be eager to shop in stores and visit their favourite restaurants and bars.
However, things will not be the same as large gatherings would still not be allowed until a vaccine is available for the disease. The office property will be affected more as businesses will continue to work from home with the help of technology. Many companies which have faced losses will be downsizing or moving into smaller offices.
On the contrary, the industrial property segment will witness a boom which has begun already. The growing demand for online shopping has led to an increased need for warehouses in Melbourne, which can store the stock and supplies.
The Resilience of Commercial Real Estate
Although the office vacancy rates in Melbourne are going up, they are not indicating a downturn for the sector. The segment had the lowest vacancy rate in 2019, and the stable markets over the years will ensure that commercial property prices do not nosedive.
The impetus provided by the government to help businesses has also provided support to small entities which are facing financial hardships. In addition, the Victoria government is offering commercial tenancy relief in Melbourne to those who are affected by the COVID-19 pandemic. The record low-interest rates have kept the buyer’s confidence intact and it has kept the resilient market stable in times of the crisis.
A stage 4 lockdown is a testing situation for Victoria and will have an impact on commercial real estate in Melbourne. However, the property experts maintain that the sector will not witness a steep downfall as it is poised to sustain such upheavals.
Sophie Barrett is an experienced real estate marketing professional with a specialisation in commercial property market. She has a Masters degree in marketing from the esteemed Melbourne Business School and has several property management certificates to her credit. Her shrewd marketing policies and business acumen have led to the most rewarding property deals in the major capital cities of Melbourne, Sydney and Perth. She is a popular name in the real estate market and has been serving the industry for almost two decades now. CommercialProperty2Sell is proud to partner with her for some astute discussions and advice on the booming sector.
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