COMMERCIAL PROPERTY SECTOR

How COVID is transforming the commercial property sector

WORDS TONY MASSARO

The COVID-19 pandemic has had a signifi cant infl uence on where we work. It has caused much uncertainty about the future workspace conditions as organisations try to deal with the problem of abundant space.

But it has also given us a chance to rethink and rework our workplace environment.

In March 2020, most organisations would have seen their offi ces as essential to their business. But now, companies are left with offi ces that aren’t fully used and may not support the type of work they want to do in the future. In June, offi ces across Melbourne sat empty as the city endured its fourth lockdown, reducing the number of staff travelling to work to 26 per cent of pre-pandemic levels, survey data from the Property Council showed.

In PwC’s Changing Places: How hybrid working is reinventing the Australian CBD report, we estimated that as of December 2020, there was enough sublease availability in Sydney’s CBD for 14,000 new workers, or around 430 dynamic start-ups, who could take advantage of lower rents, replace departing workers and reinvigorate the city.

So, what is the answer? Is subletting offi ce space a long-term strategy? And what are the alternatives for the future of their offi ce design? Also, can technology help?

The CFO alone can no longer make all the real estate decisions. Operations, HR, and even the CEO need to be involved in creating a strategy and aligning it with plans for your offi ce and workforce.

OFFICE DESIGN IN THE NEW NORMAL

Before COVID-19, many businesses were after offi ces with gyms, lounge areas, shared kitchens and large meeting rooms. But the requirements have changed. Organisations are now more concerned with health and safety essentials, such as indoor air quality, touchless technologies and appropriate distancing.

Organisations are also looking to reconfi gure their space by making slight changes to accommodate social distancing. Meanwhile, others are entirely remodelling to introduce collaboration spaces, quiet working areas and Zoom rooms. Further, more and more companies are off ering a blended remote and in-offi ce model to allow the physical offi ce space to continue being a part of team get-togethers and social events.

As businesses transform their offi ce designs, I expect to see more Zoom rooms, fewer cubicles and more hubs for teamwork – with enough variability to meet diff erent needs and expectations.

WHAT SHOULD BUSINESSES DO WITH THEIR SPACE?

Businesses need to create a long-term strategy for their offi ces to answer questions like: How much space do I need? Was my offi ce too crowded before? Did our previous offi ce support the type of work we want to do? How can our space be repurposed?

Organisations tend to think about their real estate footprint exclusively in terms of fi nancial overhead, but its value is much more. We are now seeing more companies exploring ways to repurpose their real estate to incubate start-ups and not-for-profi ts that align with their mission.

Businesses also need to understand the trade-off between maintaining offi ce space versus shrinking their footprint. For example, nearly half of all big global companies are looking to make changes to their property portfolios, according to a survey of several hundred ASX300 and Fortune 500 fi rms. More than a quarter are planning to reduce the amount of space they own or lease, while another 30 per cent are looking to change how they use their premises to suit future work trends.

Research done by global workplace company Unispace found that their clients – located in more than 60 countries – hope to achieve more than $390 million in savings from space changes. However, the opportunity to save money may be outweighed by the costs of breaking leases early, whether through penalties or your employees’ experience. While many discussions about property start with: how much space will be needed? They must also consider how employees will use the space.

PROPERTY TECHNOLOGY: THE NEXT WAVE OF ORGANISATIONAL INNOVATION

What the 2008 global fi nancial crisis was for fi ntech, COVID-19 is for proptech (property technology). It has changed real estate almost overnight. Offi ce occupancy levels drastically decreased, people began embracing hybrid work, and technology became central to continuing day-to-day business.

Businesses are also continuing to invest in technology and integrate digital tools into their operations. Examples of these new additions include zero-touch technology, air monitoring and water penetration sensors, and proximity sensors for individuals’ movement.

Delivering highly successful offi ces is a conversation that starts well before offi ce fi t-outs. There must also be greater collaboration between the CFO, operations, HR, CEO and the employees using the space. With continued observation and insight, we can meet the needs of today while looking forward to the opportunities and challenges of the future.