The future of office space

1 December 2021

By HELEN HULL

What does the future hold for commercial office space? And what will life be like in the CBD when the COVID-19 pandemic is finally under control? Commercial property leaders give their views on what’s next for the office market.

Despite the uncertainty that has come with the COVID-19 pandemic and the seeming never-ending cycle of lockdowns, Kymbal Dunne said that he is certain about one thing and that is that the commercial office market is not dead.

“Our cities won’t die, but they will certainly go through quieter periods,” Mr Dunne, Partner and Joint National Head of Private Office at Knight Frank, said.

“Fundamentally, we all want to work somewhere that’s vibrant. While Zoom calls have improved relationships with people overseas, for local teams it just isn’t the same as seeing people across the desk or in a meeting room at the office. You simply can’t replicate that.”

According to Mr Dunne, tenants have not really had the opportunity to cancel their leases and, because their leases haven’t expired, there’s not a lot they can do.

“There just isn’t freedom for many tenants to do things differently, because they have an existing obligation,” Mr Dunne said. “Some CEO’s are loath to bring everyone into the office – but, at the same time, they don’t want to let go of any space.”

“We are moving back to a situation where everyone has their own desk, rather than trend of hot desking. Offices will still be open plan, but different people aren’t sitting at different desks, so germs can be contained.” – Helen Storey, CBRE

Rise of hybrid model

Helen Storey, Pacific Operations Manager for Property Management at CBRE, believes workplace flexibility and the office environment have become a key focus for workers.

“A hybrid workplace model is now the reality,” she said. “This is the result of people’s desire to be in the office two or three days a week – not 100 per cent at home and not 100 per cent in the office.

“This means that office tenants still want the same amount of space, but they’re utilising it differently.

“We’re moving back to a situation where everyone has their own desk, rather than the trend of hot desking. Offices will still be open plan, but different people aren’t sitting at different desks, so germs can be contained.”

Ms Storey noted that the split of time between the office and remote work is coming up in conversation more often during the early stages of the recruitment phase of employment.

“In the current market, employees are making the rules and businesses are promoting their flexibility,” she said. “Being an employer of choice is so important to businesses now.”

Centre of power

Even though areas outside the CBD have been less affected by lockdowns, Mr Dunne believes the future of the office market does not lie in the suburbs or with regional hubs.

“The suburbs have been attractive in terms of continuing work,” he said. “However, in the corporate world, the further you are from the centre of power, the lesser chance you have of progressing. The reality is that the power base is where you can be seen, and this is where you can be promoted and ultimately advance through an organisation.

“If you’re in a remote location, unless you are exceptional, you don’t stand out. In a regional hub, you can be sitting beside someone with totally different expertise and you end up with silos. It’s not productive; it reduces collaboration and you don’t have access to where the power base is.”

Ms Storey added that she isn’t seeing businesses migrate away from a single headquarters.

“Our clients are keeping their headquarters and having off-shoots in other locations,” she said. “Consolidation is more of a cost saving exercise.”

According to Ms Storey, suburban areas have become a hub for smaller businesses that need an office.

“They’re not big enough to be in the CBD and key suburban locations, like Sydney Olympic Park, are becoming popular for that sort of small business.”

“Coworking has taken the world by storm, as it enables smaller businesses to have premium office space. We recommend it to clients when we see that they are only using a boardroom once a fortnight and only need office space two or three times a week.” – Kymbal Dunne, Knight Frank

Coworking model here to stay

Mr Dunne said there’s been strong interest over the last few years in the coworking model, which has been driving the take-up of empty office space.

“Coworking has taken the world by storm, as it enables smaller businesses to have premium office space,” he said. “We recommend it to clients when we see that they are only using a boardroom once a fortnight and only need office space two or three times a week.

“Coworking is attractive, because they can save thousands – or even millions – on a strata office. Businesses are so used to investing in property and they tend to buy office space because that’s the norm. The downside with coworking is that you don’t own the space and you don’t have exclusive access.”

Mr Dunne said the coworking model is having to vary due to lockdowns and restrictions, and will continue to evolve before the most viable option is realised.

“A management model where the coworking operator and the owner form a joint venture will be a reasonable outcome during uncertain times,” he said. “The operator brings the knowledge and operating ability, and the landlord provides the premises.

“Occupation of space is affected by the current lockdown and another lockdown could easily occur, therefor occupancy commitment is hard to negotiate. While this uncertainty remains, a shared risk model will become more viable.”

New hygiene features

Landlords are taking advantage of current market conditions and many are renovating, with new features being added to the checklist of ‘must haves’, according to Mr Dunne.

“As a result of COVID-19, we’ll see the automation of doors, taps and driers across retail, as well as A and B Grade office space, because hygiene is a priority,” Mr Dunne said. “The ability not to touch anything will become in vogue.

“We’ve seen the success of environmental sustainability requirements and it’s possible that the Government could take it seriously enough to implement a new rating system to include hygiene.”

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