City CBDs were hammered by COVID-19. Will they make a comeback as life returns to normal?


COVID-19 has destroyed and transformed the country’s central business districts, but in her street-side gallery, there’s no place Sonja Ari would rather be.

“I told my partner, ‘We should go out,'” she says. “We have to be there and we have to make sure people see us.”

Together with artist Adrian Flor, her brand Awen sells locally designed streetwear with Peruvian influences.

In addition to a popular online store, the pair have just opened their first permanent store – in the heart of Melbourne’s busy Flinders Lane.

“Obviously when you see it on you, you want to buy it,” says Ms. Ari.

“Having a store and people who see it and come and chat, mingle – they love us. So we love them too.

“It’s different online. You see it and (think) ‘Yeah, that looks good,’ but maybe you don’t buy it.”

Power continues

Life has not been easy in the central business districts (CBDs) of our largest cities, almost three years after the outbreak of the COVID-19 pandemic.

A year ago, central business districts across the country struggled as people stayed away from offices, public transportation and shopping centers due to COVID-19.(ABC News: Stephanie Ferrier)

Office occupancy rates are still below 2019 levels, overseas tourism is still below its peaks, and the construction and renovation boom has left some areas more scaffolding than storefronts.

But AP Property’s Zelman Ainsworth is bullish on the outlook for CBD retail across the country as he connects landlords with tenants looking for a city.

“Retailers recognize that the CBD is the heart of the state,” he says.

“Everything happens here. And starts here. And grows here.”

Zelman Ainsworth
Realtor Zelman Ainsworth, a prolific dealmaker in CBD retail, says landlords are open to more flexible terms for tenants. They don’t want stores to be empty.(ABC News: Darryl Torpy)

It is not new that a broker thinks that now is a good time to invest.

What has changed is the mix of businesses looking for space – often brands like Awen, coming to town for the first time – what Mr Ainsworth describes as a “reset” of leases.

“That has created opportunities for smaller companies,” he says.

“So you see a lot of creative, interesting, entrepreneurial companies doing a number of different things that weren’t available to them before.”

Rents aren’t really falling, but the deals on offer are different.

Instead of a standard 5-7 year lease, landlords are now open to 2-3 year leases, reducing risk for companies investing in a city store. Essentially, they are more flexible.

“It gives landlords the ability to ensure their tenants are there for the long haul,” says Mr Ainsworth.

“But at the same time, you see real estate prices being sold at the same values ​​and even better values, so we don’t see much of a drop in retail rents in the city.”

WFH forever

The picture becomes more complex when you understand that working from home (WFH) is not a trend that will disappear.

Instead, the data is cemented: work-from-home days are now a regular part of the week for a typical office worker.

Office occupancy chart
Even in cities that avoided long lockdowns, fewer workers are going to city offices than before the pandemic.(Supplied: Property Council of Australia)

Even cities like Brisbane, Adelaide and Perth – largely spared the worst impacts of pandemic lockdowns and work-from-home mandates – have seen office occupancy declines from 2019 levels.

“We think 80 per cent office occupancy is a clear win for Perth and take into account that people work a little differently these days,” said Sandra Brewer, executive director of the Western Australian chapter of the Property Council of Australia.

A woman with medium-length neat gray hair poses in front of an empty background.
Sandra Brewer says post-pandemic CBD office occupancy in Western Australia is “a clear win”. (Supplied: Property Council of Australia)

“If the past two years have taught us anything, it is that flexible working has become indispensable.”

Graph of office occupancy, difference between peak and low days.
There is a large gap between “peak day” and “low day” attendance at offices across the country. On some days in Canberra, only 30 percent of the workforce goes to the office.(Supplied: Property Council of Australia)

Property Council data from November suggests that offices in Melbourne’s and Sydney’s CBDs are at 39 percent and 41 percent respectively on a low day of the occupancy rates they enjoyed before the pandemic began.

Occupancy rates during peak days (Melbourne 75 percent, Sydney 74 percent) are better, but city centers are still emptier.

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