Sydney – Post Pandemic

Now that Australia has emerged from the COVID 19 pandemic, there is growing evidence of the behavioural changes Sydneysiders have made in the way they live, work and shop; all of which is likely to have long term impacts on the city.

The PAR Group’s latest study examined changes to commuting patterns and commercial property occupancy and yields, e-commerce spending, and residential transactions from pre-pandemic levels, to identify the impact, so far, of the COVID 19 pandemic on the way Sydney residents live, work and shop.

Transactions Continue to Slow, Cap Rates Hit Cyclical Low

Maintaining the trend, which commenced at the start of the year, shopping centre transactions continued to slow in April. In addition, commercial retail cap rates, in the three months to April, declined further, hitting a cyclical low in the process. The Data App estimate, whether compared to the previous three months or a year earlier, the number, volume (sqm) and value of shopping centre transactions all moderated. This reflected the combination of a surge in transactional activity through the course of last year and the current easing. Increasingly, it seems, the boom in shopping centre transactions, which was a dominant feature through the course of last year, has now passed.

Slowing in Shopping Centre Transactions

Shopping centre transactions have moderated. Even though transactions are higher than a year earlier, the first quarter of this year has witnessed a distinct slowing in activity. Compared to the first quarter of last year, The Data App estimate, all the transactional measures are higher, while cap rates have declined. However, it was around April last year when shopping centre transactions picked up dramatically; a trend which continued through to the end of the year. Clearly, some of the slowing in the market is seasonal, but there are growing indications the boom which took place last year has passed.

The Impact of Covid-19 on the Australian Office Market

`Nearly two years since the onset of the Covid-19 pandemic, evidence is emerging of how the pandemic has impacted the Australian economy and changed the expected trajectory of Australia’s six largest capital city office markets.

A review of current office market vacancy rates, compared to industry forecasts made prior to the onset of the Covid-19 pandemic, indicates there is just under 500,000 sqm of more vacant space than expected in Australia’s six largest CBD office markets.

Seasonal Pause or the Start of a Softer Market

Whilst shopping centre transactions were higher than a year earlier in the three months to February, activity, however measured, has moderated. The Data App estimate, the number, value and volume (GLA) of transactions in the three months to February, have all eased back from the record highs posted over the previous three months. Clearly, some of this moderation is seasonal, as the overall picture remains one of robust demand for shopping centres.

Transactions strong, but with signs of a moderation

Reflecting the usual seasonal lull at the start of the year, shopping centre transactions came off their record highs posted at the end of 2021. The Data App estimate, despite a relatively high number of transactions in January alone, in the three months to January the volume of transactions was very little changed from a year earlier. Similarly, the volume and value of transactions came off their all-time high but, nonetheless are well up on this time last year. So, despite a seasonal easing, the overall picture is one where the demand for shopping centres remains robust.

Another All-Time High For Shopping Centre Transactions

In spite of the growing uncertainty surrounding the impact of the omicron coronavirus variant on economic activity in general and retail spending in particular, shopping centre transactions maintained their strong momentum as the year drew to close. The Data App estimate the value of transactions reached an all-time high, for the three-month average to December, at over $2.3bn. This surpassed the previous record set in November. On the same basis, the volume of space transacted (GLA) also reached a new peak. By all measures, despite a slight moderation, shopping centre transactions remained strong as the year came to an end.

Getting Quarter of Million Workers Back To The Office

Following Australia’s 18-month fight against the COVID 19 pandemic, and people now drifting back to work in varying degrees, changes to commuting patterns have emerged which could have long term consequences for Australia’s CBDs.

A review of office occupancy and commuting (car traffic numbers, public transport use, walking, cycling and taxi) data highlights, at its likely peak, that there were approximately 228,000 thousand fewer office workers making the daily commute into Australia’s six largest CBD office markets. This equates to around 20% of the office population not going into the CBD each day.

Record Breaking Shopping Centre Transactions

The surge in shopping centre transactions, which started in the second quarter of the year, continued unabated through October. The number of shopping centre transactions, according to The Data App estimates, reached an all-time record high in the three months to October. On a similar basis, the volume of shopping centre gross lettable area (GLA) transacted is the second highest on record.