Time to accept changing office landscape, property industry told

It’s time for the commercial property industry to get over its fears about people working from home and accept that the office environment has changed, a recent industry event has been told.

Working from home and shifting to the hybrid work model was a major talking point at the Property Council’s 2024 Office Report breakfast.

The Property Council has been campaigning to get workers back to the office in the CBD, but speakers were confident that, at least in Canberra, where the public service is the major occupier, the industry could take the changing workplace in its stride.

JLL’s ACT managing director Tim Mutton said the hybrid model would be more prevalent as it didn’t make sense to have a permanent desk for someone coming into the office twice a week.

This meant tenant requirements were changing, and they wanted first-class amenities for staff when they were in the office, as well as to retain and attract them.

Tenants may not need as much desk space, but they still needed offices, and it was the way space was being used that was changing.

“It might be desk sharing …. we’re seeing phone booths, mini-meeting rooms, all sorts of different places, kitchen tables, cafe-style spaces for people coming together being collegiate and innovating,” he said

“That’s another thing that we need to start to accept and make the best of the office environment. The office isn’t going anywhere; it’s just changing.”

Mr Mutton said this trend would intensify because people could work from home, and employers were seeking incentives to get them back in the office at least part of the week.

“Occupiers are saying we want to have the best environment for our people when they come in. We want them to be really productive and have a great experience,” he said.

Fiona Denison, head of asset management at investment firm Charter Hall, which has many government departments on its books, called it a flight to amenity, saying there was rarely a brief these days that didn’t include flexible spaces.

Ms Denison said that would differ from building to building, but it was fundamental to attracting public and private sector tenants.

“Getting a return for that space is challenging sometimes, but if you don’t have it, the rest won’t come,” she said.

Ms Denison said agencies across Australia had the same problem of attracting talent and the work environment was part of the package to attract it.

“They’re having trouble attracting good talent because they don’t have the good office space,” she said.

Andrew Spong, ACT chair of KPMG, which occupies three floors at the award-winning 1 Constitution Place in the city, said most of his staff preferred to work in the office, and he attributed this to the quality of that environment.

Mr Spong said the precinct, with its cafes and restaurants, was world-class, and the building had gold-class sustainability accreditation and excellent end-of-trip facilities, which staff rated highly.

“In the current environment, CEOs around the country are trying to encourage people back to the office – that’s not a challenge I’ve got in Canberra.

“I think that’s a factor of the wonderful office capability that we have, in some part.”

Mr Mutton said government departments, in particular, were demanding new A-grade buildings with high energy efficiency and sustainability standards.

That posed challenges for filling lesser-grade buildings without upgrading them.

“It’s going to be hard to take C and D-grade buildings up to that modern standard in an efficient manner, and that’s where this new supply and structure of our markets probably sets Canberra apart from other markets,” he said.

ACT Property Council executive director Shane Martin said that with the right tax and planning incentives, these potentially stranded assets could become new housing, revitalising the city.

Mr Mutton said the office was important to a vital CBD, but recent public transport data indicated that it was not becoming a ghost town, showing more activity as people adjusted their work practices.

Canberra’s office vacancy rate increased from 8.2 to 8.3 per cent in the second half of 2023, the lowest in the country and well down on the national average of 13.5 per cent.

It is expected to increase by the end of 2024 due to a spike in the completion of office projects, but it should remain among the lowest in the country.

Completions this year will total 72,700 square metres, and the public sector will be prominent in leasing new offices, with major briefs from Employment and Workplace Relations, Australian Electoral Commission, Foreign Affairs and Trade, and others to come, including Infrastructure and Austrade.