Knight Frank chief economist Ben Burston said a gradual recovery in liquidity within the commercial market was on the horizon following a a pullback from investors “adjusting” to the new environment.
“Core real estate will remain highly sought after but greater priority will be given to stability and length of income and this will favour prime assets than can easily adapt to social distancing and cater to changing occupier requirements,” Burston said.
Over 2020, smaller commercial deals have been easier to progress during Covid, with less than 25 per cent of assets in the $50 million-plus range completing.
Deals ranging between $5 million and $50 million have remained more difficult to see through, with 9 per cent unconditional and 24 per cent settled since March.
Sales of under $5 million had a 56 per cent completion rate for deals over the same period.
Knight Frank national head of capital markets Paul Roberts said activity across institutional-grade assets, of $50 million-plus, remained strong, with increased demand for assets with limited short-term tenant risk.
“It has been more difficult to achieve completion on larger deals, where we typically see interest from interstate or offshore investors and more intensive due diligence processes,” Roberts said.
“These deals are taking some time to complete, with more than 75 per cent still in progress.”
Deals in Victoria’s commercial markets have slowed down further since the second wave emerged in July, and remain 43 per cent down on 2019.
The uncertainty across Melbourne has left 42 per cent of deals pending, 33 per cent of which are on-hold for “more favourable timing”.
In Sydney, just under half of active deals remain in progress. The city also recorded the highest percentage of properties—27 per cent—withdrawn from sale.