By Kirsten Craze
In a pre-COVID-19 world, some commercial landlords were content running their own show, especially in thriving markets where tenants were aplenty.
Commercial property has long been considered a safe investment because it not only offered reliable income streams and capital gains, but long-term tenants, as NSW's population boomed and real estate remained scarce. Fast-forward to 2020 and that solo way of portfolio management hit a giant snag.
To take a snapshot of just the office market, JLL Australia’s research team crunched the numbers for the September quarter and discovered that Sydney’s CBD recorded a 94,500sq m fall in net absorption while vacancy increased to 10.2 per cent. At times like these, the property manager has never been more valuable.
When experience pays off
Angela Emblen, Director of Asset Management Services for Knight Frank Australia says that when the pandemic hit the NSW property industry, one of the biggest challenges for self-styled landlords was adapting to a new way of operating.
“Landlords needed to understand the pandemic and have the ability to efficiently implement COVIDSafe control measures in order to mitigate the risk to the occupants and visitors to their properties,” she said.
“They needed to establish ongoing communications, both internally and externally, when dealing with the threat of cases within a building. And another challenge was understanding the intricacies of legislation when negotiating terms for rental assistance,” Ms Emblen added.
It was during these extraordinary times of lockdown - and the uncertainty that came with the crisis - that an experienced property manager became a vital tool.
“Now more than ever, I believe lessors are relying on their property managers to be their trusted advisors during these unprecedented times,” Ms Emblen explained.
“The discussions surrounding rental relief can be very personal, and emotional lessors need to engage their property managers as an intermediary for these discussions. In many cases, lessees are requiring more assistance than some lessors are able to provide which can be a difficult conversation to have. It is the property managers role to act on the lessor’s behalf when having these tough conversations,” she said.
As many businesses had to pivot from the office to private property in a matter of days as the state started to shut down, Ms Emblen said property managers became essential facilitators.
“Property and facilities managers were critical in managing the lessees shift to working from home during lockdown, and then again in implementing the safe return to the building. Expense control measures were also reviewed and implemented as a way to cut costs for both the lessor and the lessee,” she said.
A time for understanding
Every little thing counts in a crisis, and that goes for the talents of a great property manager according to Ms Emblen.
“Empathy and communication are key. Having an understanding of both the lessor and lessees’ circumstances and providing clear and constant communication throughout the pandemic has been essential,” she said. “Especially in helping landlords pivot their commercial spaces in challenged high density neighbourhoods.”
“Property managers have been crucial in providing an understanding of each individual tenant’s business and how they have been impacted. That also can be said for them providing updates in relation to their return to occupation and trading plans,” she said.
Now savvy property managers are also helping clients leverage market information to provide insights on what comparable buildings and owners are doing to survive in the current climate.
Ultimately, Ms Emblen said this pandemic has sifted the good property managers from the bad as some important skills have been acquired along the pretty rocky path.
“Successful property managers have learned that communication is of utmost importance, as is crisis management, tenant engagement and teamwork,” she said.
Seeking a silver lining
COVID-19 could be here to stay for some time, but according to data from REA Insights Commercial Snapshot, consumers are looking to the future.
National searches for commercial property to lease has improved, with a 3 per cent increase in September compared to August.
REA Group’s statistics showed that for NSW, the year-on-year percentage change in leasing searches for commercial property saw a 26% rise. That was a marked improvement on the data from March which showed a dramatic 30% drop for year on year searches.
Interestingly, when REA drilled down to see which common keywords were used in searches, the third-most searched term for office listings was ‘residential’, perhaps hinting that commercial property buyers and renters are pivoting to multi-purpose properties.