The commercial market in Sydney’s Haymarket/Chinatown precinct was devastated during the pandemic without the CBD workforce, international students, or tourists to support business.
After Sydney’s extended lockdown, vacancy rates across the precinct jumped from 8.02 per cent in April 2021 to 23.24 per cent in November 2021.
During Ray White Commercial Asian Investment Services’ retail survey, 81 out of 312 spaces were recorded as vacant.
Ray White Commercial head of research Vanessa Rader said the closure of larger Chinatown restaurants was a major driver for the sizable uptick in vacancies.
“Specialised food together with restaurants and café’s are one of the largest types to rationalize space, this period representing 32.99 per cent of tenancies down from 39.54 per cent last year,” Ms Rader said.
“Services tenants, which have been roadblocked during lockdown and unable to trade, such as hairdressers and beauty services, have shut doors, now representing 14.23 per cent of space down from 17.32 per cent six months ago.
“While other retailers, such as jewellers, also reduced their footprint to just 4.19 per cent from 7.39 per cent.”
Ray White Commercial Asian Investment Services director Victor Sheu said the Chinatown market had been struggling, with long-term attractions such as Golden Century nearing permanent closure.
“Commercial market in Haymarket and Chinatown has slowed down significantly throughout Covid, more so than other suburbs that are also heavily populated by the Asian demographic such as Chatswood, Hurstville, Burwood and Eastwood,” Mr Sheu said.
“This is due to the lack of overseas students as well as tourists that form the foundation of the Haymarket core — they acted as a very high percentage of overall retail expenditure within the market for goods and services.
“With majority of the CBD workforce working from home and not returning to the office until 2022, nightlife and dining precincts are still missing their core income source
“With borders shut and the difficulty of being able to travel freely between China and Australia has led to extremely poor retail performance in the Haymarket and Chinatown precinct.”
While there is some pain ahead for the Chinatown/Haymarket precinct, Ms Rader said there had been some uptick in enquiry since lockdown had lifted.
“Coupled with the return of international students in 2022, and the ongoing increase in staff returning to work in the CBD, vibrancy will return to this region,” she said.
“With a high number of leasing options in the marketplace there will be pressure on rents in the short term as well as the negotiated terms as prospective tenants seek out flexible options.
“Rents are likely to contract by up to 50 per cent over the short term which has been evident in locations with similar vacancy rates, such as Melbourne CBD, while incentives could increase to as much as 20 per cent on a longer-term deal.”
Despite these woes, Ms Rader said there would still be some opportunities for landlords.
“We have witnessed demand for investment stock, notably in the sub $2 million price range, across Sydney this year,” she said.
“Low interest rates and cash rich investors have been driving down yields and achieving new highs in capital values across all commercial asset classes.
“The Chinatown precinct has historically been tightly held and has set records regarding sub 3 percent yields well before this pandemic period, however, there has been no new retail assets come to market this year.
“Office properties in this region have continued to change hands with owner occupiers also actively pursuing quality assets.”
In recent months, Mr Sheu said activity in the Haymarket/Chinatown precinct had started to pick up.
“This can be seen in both the number of people in the precinct as well as leasing activities in both office and retail,” he said.
“However, this market is unlikely to fully recover until international borders open up by December, and more importantly when China removes their heavy quarantine regulations for returning tourists.
“Due to this submarket’s core identity as well as irreplaceable position within the Sydney City LGA, the market will no doubt recover in the coming years and eventually exceed its performance even at its peak back in 2018 and 2019 this includes that vacancy will continue to decline unless there are new spaces introduced.”
