Australia has been impacted by the effects of the COVID-19 pandemic over the past 18 months with measures on social distancing and business restrictions being put in place on the 18th of March 2020. Other restrictions include the closure of borders to non-residents and schools closing. In terms of the numbers, it was reported by the ABS that there was a 66% reduction in turnover, 64% reduction in demand and 48% of businesses report the impacting on operations.
Subsidies such as JobKeeper and JobSeeker as well as the many government grants have helped reduce the impacts of the lockdowns on businesses, however if we speak on a broad scale, the negative impacts from such restrictions and lockdowns and the uncertainty surrounding the pandemic have also played its part in reducing the values on office and retail properties.
Over the course of the year, it has been observed that the net absorption rate reached a historic low, whilst national vacancies have surged to the highs not experienced since the late 1990’s. Tenant demand softened over 2020 and has expected to remain soft in 2021 especially when considering another wide-scale lockdown which started in July 2021.
It is noted that in certain markets, the rental demand has softened due to the aspects mentioned above. Additionally, it can be noted that there have been an increase in the incentives negotiated for new leases.
These aspects need to be considered when determining the value for such properties and a thorough analysis needs to weigh up these risks in conjunction to those risk prior to the affects of the pandemic.
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