WILL THE CBD EVER BE THE SAME?
Working from home during the lockdown has given us a fresh perspective on the purpose of the office after it being the undisputed default setting for work for decades. Businesses are now re-assessing how much office space is needed as they continue to embrace remote working models and results from a KPMG survey conducted in mid 2021, suggest that even prior to the pandemic, almost 50% of Australian businesses had some form of remote working system in place.
DO WE REALLY NEED OFFICES?
Even as restrictions are lifted, companies remain uncertain about when, how — and in some cases, if — workers will return to their pre-Covid office routines. Remote working has become an attractive option for many people who want more time with family and less of a commute. The Productivity Commission found that the number of Australians working from home has remained high even when previous lockdowns have ended. This leads to the idea of a “Head Office” simply becoming a place for seniors and executives to function out of while the other layers of the business use the space on a casual basis for collaborating, innovating and problem-solving. We are already seeing an increase in NLA (Net Lettable Area) space available in all major Australian cities. In the City of Melbourne, there is an approximate vacancy rate of 10.5% (up 5% from July 2020) according to a research article by Knight Frank.
Companies appear to prefer to have their workers work at the same location at the same time for two reasons. For starters, it makes it easier to keep track of employees. This argument is backed by a large body of credible evidence, particularly for paid personnel (programmers, accountants, and so forth) whose effort is difficult to quantify. While computerised techniques of labour monitoring were prevalent prior to the epidemic, skilled work is difficult to monitor in this manner. If a business relies on proximity and real observation to discern who is working hard, moving its main functions out of an office will be more difficult.
The second reason why businesses maintain offices is to facilitate collaboration. Although this is a widely held belief, there is no evidence to support the premise that ‘watercooler’ conversation fosters creativity. While studies suggest that unstructured encounters help people exchange knowledge and create networks, no studies show that they boost corporate efficiency. If informal encounters are a vital component of the corporate culture, remote work may jeopardise them. As a result, individual businesses must carefully consider the function of informal interaction in their team and how work from home may effect it.
These two reasons for having offices have always been obvious: monitoring and informal engagement. However, after a year of working remotely, many companies’ perception of how important they are has shifted.
HOW MUST LANDLORDS REACT TO RETAIN TENANTS?
The big question for commercial investors will be how to distinguish their assets from the competition. How can you ensure that your office is one that tenants and their employees want to visit? With more NLA available to businesses we could see a reduction in leasing costs by landlords encouraging smaller businesses to move into the CBD. This may result in more tenancy fit-out work or full refurbishment to existing sites to improve their NABERS rating making their sites more attractive to potential tenants.
According to surveys, many office workers want to return to work — but just two or three days a week. This implies that providing an appealing workspace would require less space than in the past, because it is improbable that all employees will be present on the same days, meaning the quality of the space should take precedence over the amount of space. The focus should be on smaller areas that provide greater services and amenities, offering things people don’t have at home. Not everyone has the room or equipment to work efficiently from home, making things like having the latest technology, a good coffee machine and quiet space (away from home-schooling children) important.
WHAT OTHER BENEFITS CAN WE SEE FROM THE SHIFT TO WORKING FROM HOME?
- Work-life balance. As cities are becoming increasingly expensive to live and raise a family in, it is harder to achieve a good work-life balance, as people must make the choice between larger family homes on the outskirts of cities or tiny inner-city apartments. If the workweek shifts to working part-time from home, the whole work-life balance shifts in the direction of something much more favourable. Reducing commute time as well as the demand for inner-city living.
- Do we see call centre operations returning to Australia from offshore? The change to fully remote working could be an incentive for primary carers who have been wanting to return to work but couldn’t in the past. Telstra is leading the way here, with its aim is to bring all of its Call Centres back to Australia within the next 18 months.
It is forecast that 73% of businesses will accelerate their work-from-home strategies over the next five years, requiring successful office spaces to compete for every visit by offering a compelling and constantly evolving experience. We need to eliminate the barriers or frictions that make offices uncomfortable or unpopular, enhance and complement the positive, and go beyond to add some intangible chemistry or magic that lures people in and keeps them coming back time and time again.