Five key trends that point to the office of the future

It has been just over a year since Australian office workers were sent home due to the COVID-19 pandemic. During this time, many have questioned whether they would ever go back.

Workers have largely proved they can be just as productive at home, leading to the inevitable question: are the costs associated with leasing an office justifiable in a post-COVID world?

Demand data developed and tracked by realcommercial.com.au over the past 12 months reveals some interesting trends, hinting at how offices will operate in the future. Many businesses still want to occupy office spaces but what they are looking for is shifting.

Here’s a look at the five key trends that point to the office of the future.

1. Workers are looking for lifestyle

Workers are looking for offices that provide more than just a space to work and those with lifestyle amenities nearby will be more popular. Picture: realcommercial.com.au/for-sale

With daily commute times averaging more than an hour in most Australian cities, the time saved on commuting to the office is a major benefit of remote working. If employers want their workers to return to the office, they need to consider what factors will make a commute more attractive.

Providing access to lifestyle enticements such as gyms and fitness classes, restaurants and cafes is one way of doing this.

An analysis of keyword searches from the ‘For Lease’ section on realcommercial.com.au illustrates growing demand for these lifestyle factors.

Where site users included a keyword as part of a search to lease offices, the incidence of ‘access to cafes/restaurants/bars’ as a proportion of total searches was up 135% in 2020 compared to 2019.

Further illustrating this growing demand for lifestyle amenities using Melbourne as an example, searches for offices on or near the commercial heartland of Collins Street decreased by 38% between 2019 and 2020, while searches for offices near culinary hub Flinders Lane increased by 130%.

2. There’s growing demand for non-CBD offices

Just as the pandemic has seen people move away from inner-city markets in favour of outer suburban and regional areas, realcommercial.com.au data is showing a similar trend for offices.

Demand for non-CBD office space was already on the rise before COVID-19, but the pandemic has accelerated this trend.

Population growth, urban sprawl and longer commute times all contributed to growing demand for suburban and regional offices pre-COVID, particularly in Sydney and Melbourne.

Further population growth in outer suburban and regional areas post-COVID will continue to support demand for jobs – and consequently office space – outside of CBDs.

3. Workers want more space for creativity

Workers need flexible spaces that allow for more collaboration and creative ways for teams to meet and work together. Picture: Getty

As the purpose of the office shifts away from a place where workers clad in noise-cancelling headphones toil away to a place where teams meet to collaborate and innovate, the design of the office will need to change.

Practically speaking, with a higher proportion of the workforce operating remotely on any given day, this could mean fewer workstations, more and larger meeting rooms and communal areas, as well as flexible spaces that can be converted for different uses.

The analysis of keyword search data from realcommerical.com.au shows offices with greenspaces, open-plan design, terraces and even those that are pet friendly are sought after by companies looking to meet the challenges of the changing work environment.

4. Space-to-employee ratios are shrinking

Office space-to-employee ratios had been trending down for decades in Australia. The transition from buildings full of private offices to the open-plan model and then to the increased adoption of remote working has seen businesses able to reduce their real estate footprint per employee.

COVID-19 has significantly accelerated the trend towards remote working and is expected to drive further declines in workspace ratios. The degree to which ratios will be impacted, however, is currently unknown.

The cost of breaking leases early and the need for social distancing until the vaccine rollout is complete will likely ‘protect’ space ratios over the short term, and it may be several years before the full impact of the pandemic on office demand is understood.

5. Businesses are rethinking space requirements

One solution for businesses faced with greater uncertainty around their future space requirements is to lease space in nearby buildings with agile space. This approach provides businesses with the flexibility to take additional space on an as-needed basis and reduce the risk of over-committing to too much space in their primary leases.

In a global survey of more than 500 property professionals conducted by Ernst and Young and the Urban Land Institute, 60% of respondents expected large corporate occupiers will look for more widespread co-working facilities.

Agile and co-working operators provide a wide range of solutions to businesses, from workstations and private offices to meeting rooms and event spaces. As businesses navigate new ways of working, access to these spaces will become increasingly advantageous.

Just as office spaces themselves will become more flexible, so too will lease terms.  In the EY/ULI survey, 97% of respondents expected large corporate occupiers will look for more flexible and tailored office solutions, while 66% expected flexible lease contracts to become the new normal.