Victoria’s seven-day lockdown to set CBD return-to-work back months: Property Council
The seven-day lockdown could put a cloud over the city’s office market recovery. Picture: Sarah Matray.
Melbourne’s seven-day circuit-breaker lockdown will set back the return of office workers to the CBD by months.
Property Council of Australia Victorian executive director Danni Hunter said while a lockdown was necessary, their figures showed April office occupancy in Melbourne had reached 41 per cent, closing in on Sydney’s 59 per cent.
But February’s lockdown had driven that figure to “plummet to 24 per cent”.
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“This lockdown will see a significant reduction in occupancy in May and June and it will take many months to recover lost ground,” Ms Hunter said.
“The lockdown will definitely jolt Victorians’ confidence and the ability of businesses to continue their recovery. It will be vital on the other side that we boost all efforts even further to reactivate Melbourne’s CBD and ensure this is merely a small blip in Victoria’s sustained economic recovery.”
JLL senior director of capital markets in Melbourne Josh Rutman said a seven-day circuit breaker lockdown would be quickly followed by “business as usual” for most commercial property sales.
Melbourne’s towers might struggle to reach pre-pandemic occupancy levels for months yet.
But he warned it would exacerbate current delays from major companies confirming leasing plans for CBD office space.
“Businesses were already struggling to make decisions for long-term commitments to space,” Mr Rutman said.
“They are in a state of flux as to what their requirements will be and this lockdown will sustain that even further.
“It could see some spaces stay vacant for a little bit longer.”
He added the firm’s leasing agents were already seeing businesses more readily commit to suburban leases than CBD office space, and a further lockdown could see more businesses give greater credence to the idea of working closer to home.
The CBD’s streets could remain emptier than usual for several months.
“I don’t think the CBD will become obsolete, but for certain businesses the idea is appealing,” Mr Rutman said.
Colliers International national director of office leasing Andrew Beasley said the lockdown had come just as the city began to see a bit of momentum for commercial leases.
“It started to come back into the city over the last couple of weeks, and we had seen a really high volume of tenancy requirements coming back,” Mr Beasley said.
“But unfortunately this does put the handbrake on things and takes a bit of heat out of the market.”
If the lockdown remained at just seven days the impact would be minimal, but a longer stretch could exacerbate a mindset shift that has slowed workers’ desire to return to the office.
“Overall, our view is that Sydney is up and running and unfortunately, given our (Melbourne’s) lockdown hangover, it is making it a lot more difficult to bring people back in,” Mr Beasley said. “Their mindsets have changed.”
Office workers had just begun returning to the CBD in significant numbers. Picture: David Caird
On the other hand, he also noted that another week of video calls from kitchen tables would potentially remind some workers how much they preferred interacting with people face-to-face.
Ms Hunter added that given a further blow to businesses, the government should scrap plans to increase land tax, stamp duty and implement a new windfall gains tax.
“The Andrews Government must recognise that our sustained economic recovery is still very fragile and uncertain,” Ms Hunter said.
Office building and residential development construction is expected to continue during the lockdown.
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