Coronavirus: How Melbourne’s lockdown will affect commercial real estate

Melbourne’s commercial property market is bracing for another period of uncertainty, with the city’s wider metropolitan area again forced into lockdown due to the spread of coronavirus.

Victorian Premier Daniel Andrews announced on Tuesday that as of Wednesday at 11.59pm the city would return to previous restrictions that prevent Melburnians from leaving their homes other than for work, shopping for essentials, caregiving or exercise.

Which areas are in lockdown?

The latest lockdown will see greater Melbourne and the Mitchell Shire, which takes in the Hume region in the city’s outer north, placed back under Stage 3 restrictions for the next six weeks.

The lockdown also takes in the Mornington Peninsula, but the Geelong region has not been included under the latest restrictions.

What it means for commercial real estate?

REA Group chief economist Nerida Conisbee says the Melbourne lockdown will be a devastating blow for some sectors of the commercial property industry, which had only just begun to emerge from the earlier lockdown phase.

Offices in particular would be hard hit, she says, with much of Melbourne’s workforce now forced to remain at home for longer.

“Already no one had really returned to the office, so this is going to really delay that,” Conisbee says.

“Apparel and cafes and restaurants, or anything that’s ‘fun’, will not do well.”

“The other major factor is foreign students. They’re not going to be able to come back to Melbourne in a hurry now, either. That flows through to student accommodation, which flows through to development site sales.”

But she says other asset classes are better placed to continue performing, despite the upcoming challenges.

“Other sectors are a little bit less impacted.”

“Industrial probably won’t be too bad, given online shopping will continue.”

Face-to-face commercial property auctions will be shelved until restrictions are lifted.

Commercial property auctions impacted

Like residential auctions and open for inspections, face-to-face commercial property auctions will again be put on hold until restrictions are lifted.

Auctions scheduled in the coming days may be cancelled or postponed, while others will likely be shifted online.

But the industry will almost certainly be better prepared for this circumstance this time around, with many agents and vendors having pivoted towards online auctions or private sales during the coronavirus pandemic’s first wave.

“Auctions aren’t as big a deal in commercial property (in comparison to residential), but all of those things will be impact the market to some degree,” Conisbee says.

Will JobKeeper be extended?

Victorian business owners and employees are already questioning whether the JobKeeper scheme, which provides $750 weekly payments to businesses to enable them to pay and maintain staff, will continue beyond September when the scheme is set to end.

The answer likely won’t be known until at least July 23, when Treasurer Josh Frydenberg provides a major financial update and announces the results of a review into the wage subsidies.

But on Tuesday Frydenberg hinted there may be further assistance for impacted Victorians.

“We will provide targeted support for those who need it,” he said.

“The measures we have announced have been temporary, they’ve been targeted, scalable, proportionate to the challenge we face and that will continue to be the case for any more announcements we make.”

It is not yet clear whether JobKeeper will be extended beyond September.

Stock levels may fall

A reduction in commercial property stock on the market nationally was one of the consequences of the first wave of coronavirus.

With the market still yet to reach pre-COVID levels, there may again be a lack of stock introduced to Melbourne’s market, as vendors hold fire while waiting to see how the coming weeks and months play out.

Will banks provide further relief?

Bank customers still struggling financially to the impact of coronavirus are being offered an additional four-month moratorium on repayments.

But the banks also warn that businesses and property owners with the capacity to begin paying back their loans must begin doing so once the initial six-month deferral period ends in September.

The Australian Banking Association says people and businesses who are still battling to make repayments as the end of the moratorium approaches will also be contacted to determine whether they can vary or restructure their loan.

The State Government has also flagged further relief, which will be announced in the coming days.

No free childcare

The Federal Government has rejected calls to continue providing free childcare for families living under lockdown in Victoria, but has promised concessions for families where a parent has lost income due to the pandemic.

Education Minister Dan Tehan says that if parents under lockdown choose to keep their children at home, their childcare gap fee will be waived.

“If your child is absent because of COVID-19 related reasons, we will wave the gap fee, so it means that as a family you will pay nothing for your child’s enrolment at childcare while your child is absent,” Tehan said.