Commercial Property Guide Special Covid-19 Survey

Commercial real estate agents across Australia have responded to the crisis proactively. Most have adjusted their business to initially survive and then plan for the future. This survey conducted by email on 20th May 2020 gathers their collective observations and informed opinions (see Attachment for Survey Results Summary). While the future for all businesses may be uncertain, commercial real estate agents are well positioned to identify early any structural changes – for example: the move away from CBDs, the dramatic drop in immigration levels, working from home and, of course, the future of high street retailers.

Commercial Sales

Not unexpectedly, commercial agents have experienced significantly different impacts across the major property types. Retail properties are reported to have a high negative impact on sales volume by 55% of agents, accelerating the pre-crisis trend. While only 6% say there has been no impact on retail volume. There has been less change in sale prices where 24% of those surveyed indicated no change in retail property sale prices.

Office sale prices and volume were both down to a lesser extent than retail, reflecting the general decrease in business activity. Only 15% reported a high impact on office sales.

Industrial real estate sales were much less affected. In fact 9% reported a small positive impact on sales volume.

About one-fifth of agents said there was insufficient evidence to give an opinion about changes in price at this stage.

Impact on Retail Property Sales Volume

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Impact on Office Property Sales Volume

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Impact on Industrial Property Sales Volume

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Commercial Leases

Commercial real estate leases suffered a similar decline to commercial sales. The combined office lease survey of both high and small impact on transaction volume was a total of 76% negative. Retail rents were hardest hit, both in terms of number of leases and their lease price achieved. Industrial property rents were the least impacted property type with only 22% reporting a highly negative impact on volume. Many agents (about 13%) thought it too unclear to make a call about commercial lease impact of the Covid-19 crisis.

Impact on Retail Property Lease Prices

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Impact on Office Property Lease Prices

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Impact on Industrial Property Lease Prices

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Current Level of Business

Encouragingly, the overwhelming number of agents (over 90%) reported that they were still doing deals in recent times.

When agents were asked about the drop in business activity since the end of February, most answered the question. There was a wide range of responses. The average drop in business was 45%. This compares with 20% reported by accounting software company Zero for the broader Australian real estate industry and 71% drop in commercial property transactions reported in the US in April.

Looking Towards the “New Normal”

When agents were asked about their expectations for the future size of the commercial real estate agency industry, most foresaw a downsizing. The clear majority of respondents (73%) saw a small decrease in the number of agencies. While the expectations about the number of individual agents were more pessimistic. 27% are expecting a large decrease in agent numbers and 58% are expecting a small decrease in commercial property consultants.

Agency Numbers	Individual Agent Numbers

Agents Using Technology

We asked agents about their use of three often discussed technology solutions that are seen to help in the crisis. The majority of agents reported that they used these tech solutions to help with their selling processes:

• Internet Conferencing communication tools, like Zoom was used by 78%.
• Electronic contracts were used by 79%; and
• Remote Viewing or self-guided property inspections was used by 70%.

Our Take-away

It's not unreasonable to think commercial real estate agents would be better informed than the broader community. Each day they are in contact with a wide range of industries – from severely affected retail shop operators to thriving on-line fulfillment businesses – and everything in-between.

So commercial real estate agents' views are worth listening to and reporting. Their collective view in May 2020 seems to indicate quick adaption to the current situation. Charles Darwin “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change”.

Attachment

Summary for Corona Survey May 2020

Has there been an impact from the crisis on the VOLUME of Commercial Property SALES since the end of February?

High negative impact		54.5%
Small negative impact		30.3%
No impact		6.1%
Small positive impact		0%
High positive impact		0%
Other / not answered		9.1%

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High negative impact		33.3%
Small negative impact		48.5%
No impact		6.1%
Small positive impact		0%
High positive impact		0%
Other / not answered		12.1%

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High negative impact		18.2%
Small negative impact		42.4%
No impact		21.2%
Small positive impact		9.1%
High positive impact		0%
Other / not answered		9.1%

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Has there been an impact from the crisis on the SALE PRICE of Commercial Property since the end of February?

High negative impact		33.3%
Small negative impact		24.2%
No impact		24.2%
Small positive impact		0%
High positive impact		0%
Other / not answered		18.2%

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High negative impact		15.2%
Small negative impact		42.4%
No impact		24.2%
Small positive impact		0%
High positive impact		0%
Other / not answered		18.2%

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High negative impact		0%
Small negative impact		48.5%
No impact		36.4%
Small positive impact		3%
High positive impact		0%
Other / not answered		12.1%

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Has there been an impact from the crisis on the NUMBER OF Commercial Property LEASES since the end of February?

High negative impact		48.5%
Small negative impact		30.3%
No impact		6.1%
Small positive impact		0%
High positive impact		3%
Other / not answered		12.1%

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High negative impact		39.4%
Small negative impact		36.4%
No impact		9.1%
Small positive impact		3%
High positive impact		0%
Other / not answered		12.1%

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High negative impact		24.2%
Small negative impact		39.4%
No impact		27.3%
Small positive impact		0%
High positive impact		0%
Other / not answered		9.1%

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Has there been an impact from the crisis on Commercial Property LEASE PRICES since the end of February?

High negative impact		36.4%
Small negative impact		36.4%
No impact		15.2%
Small positive impact		0%
High positive impact		0%
Other / not answered		12.1 %

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High negative impact		18.2%
Small negative impact		54.5%
No impact		12.1%
Small positive impact		0%
High positive impact		0%
Other / not answered		15.2 %

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High negative impact		9.1%
Small negative impact		51.5%
No impact		24.2%
Small positive impact		0%
High positive impact		0%
Other / not answered		15.2 %

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Do you expect the number of agencies and/or consultants to decrease as a result of the crisis

Large decrease		6.1%
Small decrease		72.7%
No change		21.2%

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Large decrease		27.3%
Small decrease		57.6%
No change		12.1%
Other / not answered		3%

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Yes		90.9%
No		6.1%
Other / not answered		3%

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0%		3%
20%		3%
25%		12%
30%		3%
40%		9%
50%		15%
60%		6%
70%		6%
80%		3%
90%		3%
Other / not answered		36.4 %

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What social distancing friendly services are you currently providing your customers?

Yes		78.8%
No		12.1%
Other / not answered		9.1 %

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Yes		69.7%
No		24.2%
Other / not answered		6.1 %

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Yes		78.8%
No		12.1%
Other / not answered		9.1 %