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

COVID-19 has smashed and changed the nation’s central business districts, but in her laneway gallery there’s nowhere else Sonja Ari would rather be.

“I told my partner, ‘We’ve got to go out’,” she says. “We’ve got to be out there and we’ve got to get people to see us.”

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

Alongside a popular online shop, 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,” Ms Ari says.

“Having a store and people seeing it and coming to chat, to mingle – they love us. So we love them, too.

“Online, it’s different. You see it and (think) ‘Yeah, that looks good’, but you might not buy it.”

Strength continues

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

A largely empty Elizabeth Street, viewed from the tram tracks in the centre of the road.
A year ago, central business districts around the nation were suffering as people have stayed away from offices, mass transit and shopping centres due to COVID-19.(ABC News: Stephanie Ferrier)

Office occupancy rates are still below 2019 levels, overseas tourism is still lower than its peaks and a construction and renovation boom means some areas are more scaffolding than storefront.

But Zelman Ainsworth of AP Property is upbeat about the prospects for CBD retail nationwide, as he connects landlords with tenants looking for a city.

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

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

Zelman Ainsworth
Real estate agent Zelman Ainsworth, a prolific deal-maker in CBD retail, says landlords are open to providing more flexible terms to tenants. They don’t want shops sitting empty.(ABC News: Darryl Torpy)

That a real estate agent thinks that right now is a good time to invest isn’t new.

What has changed is the mix of businesses seeking space – often brands like Awen, coming to the city for the first time – which Mr Ainsworth describes as a “reset” of tenancies.

“That’s created opportunities for smaller businesses,” he says.

“So you’re seeing a lot of creative, interesting, entrepreneurial businesses do some different things that weren’t available to them previously.”

Rents aren’t exactly falling, but the deals being offered are different.

Instead of a standard lease running 5-7 years, landlords are now open to 2-3 year leases, which lessens the risk for businesses making the investment in a city store. Essentially, they’re being more flexible.

“It’s giving landlords the opportunity to ensure that their tenants are there for the long term,” Mr Ainsworth says.

“But at the same time, you’re seeing property prices sell at same values and even better values, so we’re not seeing much drop in much of the retail rents in the city.”

WFH forever

The picture becomes more complex when you understand that working from home (WFH) isn’t a trend that’s going away.

Instead the data is cementing: WFH days are now a permanent part of the week for a typical office worker.

Graph of office occupancy
Even in cities that avoided long lockdowns, there are fewer workers going in 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 a drop in office occupancy from 2019 levels.

“We think 80 per cent office occupancy is a clear victory for Perth and takes into account that people are working a bit differently these days,” says Sandra Brewer, executive director of the Western Australian division of the Property Council of Australia.

A woman with medium-length, neat grey hair poses in front of blank background.
Sandra Brewer says Western Australia’s CBD office occupancy rate is “a clear victory” post pandemic.  (Supplied: Property Council of Australia)

“If the last two years have taught us anything, it’s that flexible work is here to stay.”

Graph of office occupancy, difference between peak and low days.
There’s a stark gap between “peak day” and “low day” attendance at offices around the nation. On some days in Canberra, just 30 per cent of staff head in to the office.(Supplied: Property Council of Australia)

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

The peak day occupancy (Melbourne 75 per cent, Sydney 74 per cent) is better, but still leaving the city centres emptier.

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