East coast offices will stay empty for monthsLights on but no one home: Sydney’s office occupancy rate stood at 4 per cent in September. Photo: Wolter Peeters

East coast offices will stay empty for months

Lockdown-hit east coast offices will limp along mostly empty to the end of the year, with occupancy as low as 4 per cent in Sydney, the Property Council of Australia’s latest monthly office survey of building owners and managers shows.

The two largest capitals and Canberra have been hardest hit by the pandemic and while Sydney’s 4 per cent occupancy figure – a proportion of its assumed pre-COVID-19 rate of 90 per cent – flatlined last month and Canberra held at 8 per cent, Melbourne slipped to 6 per cent from 7 per cent.

Even as vaccination levels pick up, the figures show the challenge for landlords and policymakers in recovering from the delta variant of COVID-19. More than three-quarters of respondents said they do not expect to see a material increase in CBD office occupancy levels within the next three months.

A high level of co-operation between landlords and employers to prepare offices for staff was also crucial, Property Council chief executive Ken Morrison said.

“Thriving CBDs aren’t an optional extra, we need to have our commercial centres reactivated properly if Australia is to replicate the strong economic recovery that we experienced following last year’s lockdowns,” Mr Morrison said.

“This isn’t just about the coffee shops, dry cleaners and restaurants, the activity in our CBDs supports millions of jobs and generates hundreds of billions of dollars broader economic activity.”

Occupancies weakened elsewhere during September. Brisbane’s average dropped to 51 per cent from 60 per cent in August. Adelaide, which dropped as low as 15 per cent in July (having stood at 80 per cent in June), ticked down to 64 per cent from August’s 65 per cent.

Perth and Hobart were little changed, while Darwin’s occupancy rate rose to 89 per cent from 82 per cent.

Landlords are taking the challenge seriously. Brookfield Asset Management’s managing partner for real estate Sophie Fallman last week said the Australian arm of the global office landlord was planning individual reactivation plans for buildings, recognising that they were all different.

“But broadly they will be focused on moving our marketing budget to basically supporting our retailers to the benefit of our occupants,” Ms Fallman said.

Luring people back with food was going to be a key strategy, she said.

“We’ll be working with our tenants to give people free coffees and warm doughnuts and beautiful bunches of flowers when they walk in the front door, to activate and remind people how good it is to be back – as soon as it’s safe to do so and in line with government restrictions,” Ms Fallman said.

But even with high vaccination levels, getting people used to coming back to the office would not necessarily be a “linear” experience, and landlords and tenants would likely have to experiment with different strategies, she said.

“We should all expect it will probably be a bit lumpy and a bit choppy,” she added.

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