Do you prefer to work at your kitchen table or at the office?

• We wrote about our view on financing office developments below replacement costs last month but that was prior to the perceived impact of stage 4 restrictions in Melbourne.
• Changes in work practices due to the coronavirus and significant uncertainty have resulted in a significant demand shock for the commercial office markets. I.e. leasing is at a standstill
• We have engaged a multitude of experts and no one knows for certain the duration or permanency of tenants holding back from new pre-leases.
• What we do know for certain is a shift in supply dynamics due to tighter lending criteria and pre-commitment hurdles is happening.
• The number of high-quality borrowers seeking alternative finance for their mooted developments is a clear metric we can attest to and is indicative of impending supply constraints
• The shelving or delay of approved projects is expected to result in the market rebalancing by 2023

The impact of the COVID-19 pandemic has and will continue to be wide-spread, long-lasting and variable. Some things will quickly return to “normal”. Other aspects of our daily lives, including how we work, have clearly undergone a perceived shift. The following infograph from the NAB Australian Commercial Property Survey (Q2 2020) shows how survey respondents expect the office market to be affected by the impact of COVID-19 on working patterns