In March 2020 the Australian workplace was propelled into flexible working. Just months before the Harvard Business Review would published articles titled ‘How to Convince Your Boss to Let You Work from Home‘. Whilst that article and hundreds of others presented empirical evidence that WFH that was good for us and them, we still hadn’t quite embraced flexibly in the corporate culture. Now, with the catalyst of a global pandemic, we are all well and truly versed in WFH and have proved that productivity does not suffer. And so the industry expects that certain flexible working arrangements are here to stay.
The changing workplace
Nothing is perfect, and whilst there are clear benefits in working from home such as increased productivity, work-life balance and decreased emissions, there are some downsides. One of the most common being that it can be isolating. As a consequence we think that workplaces will make a move toward catering to our more humanistic qualities. Such as, an increase in spaces designed for employee collaboration.
Professor Frederik Anseel from UNSW conducted a study (COVID-19 and the Workplace: Implications, Issues and Insights for Future Research and Action) which suggests that workplaces will need to focus on building a sense of community and belongingness. Companies needs to ensure that they don’t revert to a nine-five mentality. But rather, as Professor Ansell suggests, make offices a place where one builds a community and social identities.
We expect that flexible working will continue to be ingrained in the weekly work cycle once the pandemic has concluded. Most businesses are anticipating that employees will work from home on average 2 days a week.
Social distancing is also around for the long-haul. This means that businesses are going to have to adapt their existing fitout and closely monitor density. A number of new commercial fitouts that we have been involved in are implementing one-way thorough fares through the office and using no-touch technology.
What does it mean for commercial property assets?
Companies will likely be keeping their flagship HQ though, as foreshadowed above, the way that space is utilised will change. To that end, we imagine the number of private offices will decrease. Open-plan seating will likely start operating on a hot-desk system where employees will reserve a desk as needed.
Despite the re-purposing of existing space, companies are ultimately going to require less space. David Cannington from Investa estimates that the long term net negative decrease will be around 15%-20%.
The decrease in required office space is going to increase vacancy rates, which will ultimately decrease rents. We are expecting that B grade assets will be hit the hardest because the decreased rents will give smaller players an avenue into A grade and premium CBD buildings.
What about the retailers?
The decreased foot traffic in our CBD’s will ultimately impact retail tenants. Particularly, those relying almost exclusively on the corporate clientele – coffee shops and lunch haunts. We’ve worked with a number of retailers to renegotiate the terms of their lease as a result of the changes from COVID-19 to cope with the decreased foot traffic.
There are certain behavioural changes that are going to outlive the global pandemic. As a result, companies will change the way that they use office space. And this will have a flow on effect to the overall leasing market and retail assets located in CBD locations.
If you’re considering taking advantage of the current market to move from a B grade to an A Grade building, get in touch with one of our Tenant Representatives here.
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