Property Australia

Office anxieties and realities

Karen Jamal Karen Jamal July 13, 2021

With NSW back in lockdown, office owners and tenants can learn from 2020’s anxieties, says Colliers head of tenant advisory, Simon Crouch.


Anxiety 1: Office vacancy will hit record levels

Companies were expected to reduce their space by up to 50 per cent, with people working from home permanently.

140721 - Story 3 - Simon Crouch“Vacancy has risen across the board however is starting to stabilise and will not hit the record levels that occurred in the early 90s,” Crouch says.

While occupancy levels are still below pre-Covid levels in some states, Crouch says flexible working arrangements are not directly translating into a corresponding amount of reduced office space.

“Many companies are considering taking less fixed desks, but they are looking to take greater collaboration and meeting spaces. Curating a hospitality experience will offset reduced desks to a degree. Companies are focusing on making the office the best possible experience to enhance culture and attract talent,” Crouch says.

“While hybrid working is a trend that is likely to be here to stay, the doomsday of CBDs becoming obsolete will not happen as we see demand increasing.” Crouch points to the flight to quality, new hybrid workspaces and “business leaders requiring amazing offices to get the most out of their people” as examples of why the office will remain central to company culture.


Anxiety 2: Decentralisation will destroy the CBD

Lower rents in the suburbs and hub and spoke models were two of the trends expected to kill the central office in 2021.

Crouch says this anxiety has not materialised. While cost cutting was a focus in 2020, “we are now seeing a greater emphasis on getting the people strategy right”. He points to three tenants from Macquarie Park and North Ryde that “recently made the decision to relocate to North Sydney and the CBD into the highest quality office space”.

“There is a flight to quality taking place in CBDs, with buildings that prioritise fantastic amenity and experience leasing the most space.

“Further, hub and spoke will not materialise, as the spoke will be working from home for those workplaces and employees seeking flexibility.”

Anxiety 3: Coworking will never recover

The growth of coworking was expected to suffer as people steered away due to health concerns. While there is still some degree of uncertainty, Crouch says flexible workspaces are again proving popular when government restrictions ease.

“Smaller tenants who shut shop and worked from home are coming back and starting to refill centres as they realise they can’t have all staff at home five days a week,” he says.

“Co-working centres offer a low capex set up, short lease terms and ability to work from multiple locations that are attractive to many companies. In addition, many companies are still uncertain about how much space they will actually need in 12 months so co-working can provide a good interim solution. The better quality centres that provide the hospitality experience and amenity are proving the most popular.”


Anxiety 4: Long leases are in the past

Industry analysts and experts were predicting that tenants would no longer commit to leases longer than three to five years, but Crouch says the reality is the opposite.

Larger companies will take long term leases to lock in attractive lease terms, provide incentive capital for new hybrid workplaces and enhance the office experience.”

He does offer a caveat: leases need to be flexible. But “landlords are now far more willing to work with tenants to find solutions that provide greater flexibility, such as break clauses and growth and retraction rights,” he says.


Anxiety 5: The days of hot desking are over

Tenants were expected to move away from desk sharing and agile seating arrangements, but Crouch says hybrid working will lead to greater desk sharing. This may provide opportunity for larger organisations to reduce space.

“Companies will not want to see rows of empty desks, so lockers, desk sharing, agile work settings and neighbourhoods are here to stay.” Advanced desk booking technology and sophisticated cleaning regimes will overcome health concerns.

“There is no one size fits all,” Crouch concludes. Every company needs to take the time to plan to determine the best solutions for their business, but the office will remain “a critical tool for attracting talent, collaboration and innovation,” and “giving employees choice and flexibility”.