The tightly held office market in Australia, particularly in Sydney and Melbourne, has had a stellar run in recent years, with strong fundamentals and strong tenant demand for space resulting in record low levels of vacancy.
The last six months, however, has seen COVID-19 act as a ‘time machine’ of sorts, with containment measures transporting us into the Future of Work, where a large portion of the workforce has successfully worked from home rather than in a central office.
As restrictions ease and the full impacts of the pandemic come to light, businesses are reconsidering their organisational structures, ways of working and the spaces they use. In this environment, along with the increasing availability of flexible and ‘co-working’ spaces, the future of the office has naturally come into question.
While it’s too soon to know exactly what the ‘future of office’ will be, speaking to consumers of office space, some key trends are becoming clearer as we emerge from the peak of the COVID19 crisis and enter sustained recovery. The office isn’t going anywhere, but how it is consumed and managed will be a delicate balancing act between productivity and social distancing
Below I have outlined a shortlist of the some of the opportunities landlords can utilise to unlock increased tenant engagement and retention in a post COVID19 workplace, but many more will inevitably emerge as workers and their companies adapt to the radical changes in economic and social conditions.
- Health Security & Wellness: The bushfires earlier this year were a stark lesson that climate change can have real and material impacts on how we live and work. Air quality, particularly in Sydney was a major issue for workers in the city and tested the capacity of our buildings. With the outlook for bushfires likely to remain high, and with workers feeling anxious about being in contact with potentially sick commuters, building owners will be able to create competitive advantage through offering healthier and safer work environments for their customers.
- Placemaking & Amenity: With workers spending an increasing amount of time at home, with close proximity to services and amenity, placemaking and improving the retail offering at office assets will become more important. Similarly to the way shopping centres improve dwell times, and through that spending levels, office owners will need to increased their tenants dwell time and attraction to the location. Fortunately, most Australian cities have good retail amenity, however, a focus on building amenity will also become more critical. In newer assets amenities such as gyms, social spaces, reading areas, green spaces have all been added to encourage office utilisation and welcomed by tenants for encouraging greater productivity.
- Flexibility from 80/20 to 50/50: Allowing tenants to scale up and down their requirements isn’t new, but the proportion of space they will require to be flexible is likely to increase are more staff work remotely. In the lead up to the COVID19 period, flexible space typically accounted for 20 per cent of a tenants requirements, however, in the new normal this could go as high as 50 per cent.
- Broader work ecosystems: Office space as a product isn’t going anywhere, and cannot be disrupted out of existence. However, the nature of the workplace will change to incorporate a wider ecosystem of locations and access points to support convenience, functionality and the health of the occupiers. Offices will need to adopt a more destinational purpose, a meeting place to collaborate, socially engage and bond with colleagues and customers.
- Decentralised corporate knowledge: The most valuable asset a company has its employees, a slogan many CEOs uses but it also happens to be true because employees are walking, talking custodians of corporate knowledge, culture and skill that have been developed over many years. The value of this knowledge is most noticeable when it is shared amongst teams via collaboration. Recreating this value chain quickly is next to impossible, but how do companies continue to generate this value when?
The way we access and consume office space, collaborate, ensure safety and encourage productivity will shape the next evolution of workplace environments. Landlords will need to harness new capabilities and broaden their offer to remain competitive in a tightly contested tenant market. In the lead up to COVID19, traditional office markets were being disrupted by new offerings in flexible space, but with mass movements of people to remote work locations, the disruption of the traditional workplace model has accelerated and will require a radical rethink in the way we curate workspaces to deliver beneficial experiences for tenants and solid returns for investors.
Future of Office Space Summit
Luke will be speaking at our upcoming Future of Office Space Summit, taking place from 17-18 February 2021. Get insights from technology & innovation leaders, tenant & workplace experience experts, property fund managers and industry thought leaders.