A Shift in Perspectives – What Commercial Property Owners Are About to Experience that Many have Never Before

In rental and lease markets it’s fair to say that for the best part of three decades, the landlords have been the price setters. The rules around negative gearing in domestic supply enable sizeable portfolios. Demand in office spaces in central suburbs has been consistently tight. And now, finally, CFO’s have become aware of the drain on cash that has been the HR Director’s remit – staff office space

Which is now about to change. What has become clearer, prompted via Covid and people ‘forced’ to work from home is that NO, you really DO NOT need that sizeable office space. Instead you need improved management practises that enable people to work from home. And with that practise developed, your office rental bill plummets. Spending on office space is a choice with a direct impact to the bottom line. The long errant assumption that we cannot trust people to work effectively when we cannot stare at the back of their heads (the 1780’s Wedgewood factory model of ‘Overseer’) has been in need of an overhaul since the 1980s.

CBD based CFOs have had a chance, especially in lockdown sites like Melbourne, to wander through cavernous warrens of empty desks and chairs and they have begun to ask, ‘do we really need ALL THIS SPACE?’ Clearly, no you don’t. Employees, no longer forced into driving hours each day or wading through public transport turnstiles, are demanding to stay home. En Masse the shift has occured is going to see less than half the required CBD space despite some people calling for a return back to ‘normal’.

Already businesses are seeing the advantages in smaller sites in non CBD or inner suburb locations. Frankly, as has ALWAYS been the case, Work from home, WORKS! The old ‘normal’ is dysfunctional and the unwillingness or inability of HR Directors to set the tone in upskilling middle management is a core problem.

I’ve been looking for a second office interstate and have just come from a week traveling around looking at potential sites. They key criteria was ‘lifestyle’ – is this a place where employees would like to live. NOT ‘is this where I want my office to be?’ The location is based on employee needs. If they’re likely to be happy to live nearby and come in to an office occasionally, that will work for me too. And I can assure you, that the offers from agents are very fleixble indeed with a much more favourable offers likely in the next few months as larger businesses determine that they really do not need to have their staff in the CBD area full time all the time. And if that means smaller offices (it does) it also means non CBD appeal increases.

Many Landlords in Commercial Property are about to experience what it is like to be a Price TAKER. For many, that won’t taste quite so sweet. But for local cafes, shops and other locations out in the suburbs, demand will increase. Arguably what is happening is a shift from the high pool of money centralised in CBD environments and a sharing out to the suburbs. The question for Commercial Property Managers now is ‘what do we do with the vacated space? If they hold off for price increases, they’ll have empty stock sitting on their books for years. Or do they shrink supply by taking some office space off the books through conversion into residential or other uses? There’s much to consider in this sector though one thing is clear, the workforce is not coming back the way it used to