The future of the office is remote-first

Here’s what experts say will happen to the CBD.

• The pandemic has transformed the workplace forever, as organisations that had previously committed to expansive office space pivot to remote-first work policies.
• Experts say working trends precipitated by the pandemic may be slow to wind back.
• “That is evolving the way we think about our real estate strategy,” Ben Dawson, Cisco’s ANZ vice president said.

In Australia’s two biggest cities, the pandemic has hollowed out the central business district. 

Property Council of Australia data shows CBD workers were slow to return to offices once restrictions were lifted in early 2021, and current occupancy rates are well below pre-pandemic levels.

The latest occupancy rates showed Sydney and Melbourne sitting at 4% and 7% respectively. 

But at the same time as several tech companies have committed to remote-first work — Canva and Atlassian this year told employees they will only be required to come into the office eight times a year — many major corporate and tech companies have committed to expansive office spaces. 

Atlassian last year committed to a 40-story hybrid timber building in Sydney’s CBD, part of the NSW government’s plan to develop a tech precinct at Central station. It plans for it to be a base for 4,000 employees when construction finishes in 2025. 

Similarly, Deloitte Australia has announced it will take up a 10-year lease on a new Parramatta office it said is part of a plan to move closer to workers’ homes. 

The Commonwealth Bank of Australia (CBA) also launched an expansive new space in Eveleigh in Sydney’s CBD in 2019 and was set to house 10,000 employees before the pandemic shut its doors. It’s still set to be the largest single company workplace project in Australia. 

In the past few months, even more, companies have committed to remote-first work. 

In early October, Yellow Pages publisher Thryv Australia announced it was giving up its almost nine levels of Melbourne CBD office space in favour of a fully remote setup, with its chief executive John Allen stating the pandemic escalated its decision to go remote. 

Danni Hunter, Victorian executive director of the Property Council of Australia, told The Daily Mail Australia that it was seeing a trend of changes to how companies approach their workspace. 

“Lots of businesses are making or have made decisions about what the return to the workplace looks like,” Hunter said. 

“We have seen that in the high amount of activity in the subleasing market.”

She said while businesses aren’t taking up less space, they are changing how they use it ahead of a return to the office when Victoria hits its 80% fully vaccinated target in early November. 

Hunter also said the government would need to encourage people to come back into the city for work, expecting it would take months for occupancy to rise from its current 6% level.  

Even as lockdowns are lifted, the Property Council of Australia’s latest monthly office survey of building owners and managers revealed more than three-quarters of respondents said they did not expect to see a material increase in CBD office occupancy levels within the next three months.

Empty office space

A CBA spokesperson said the organisation was currently “working through its return to office timing and approach”.

Prior to the current lockdowns, the company had returned to the office in a “hybrid capacity that balanced being in the office with working remotely,” suggesting its plans to scale up to a 10,000-strong office hub would likely be delayed indefinitely.

As organisations navigate how to best return their workforce to the office, Australia’s two biggest cities have launched initiatives designed to lure workers back.

The City of Sydney has equated the total losses to city businesses at approximately $3 billion since the renewed restrictions kicked in. 

A City of Sydney spokesperson told Business Insider Australia its support package would include relief in the form of “grants, donations and fee waivers as well as support to revitalise the city post-lockdown”.

Similarly, the City of Melbourne is scrambling to bring back economic activity to its CBD as it emerges from the world’s longest period of total lockdown. 

Along with funding of $100 million and $200 million respectively for the Melbourne City Recovery Fund and the Melbourne City Revitalisation Fund, the city is providing grants for outdoor spending initiatives to push businesses to set up outdoor trading for summer. 

A power shift

But this may not be enough, warns Ben Dawson, Cisco’s ANZ vice president — a company that has offered flexible work policies for its employees for 30 years.

He told Business Insider Australia he expected to see many follow a similar path to Cisco as they negotiate “the role of traditional business in a central business district”.

Dawson said that even as a company with a longstanding flexible work policy, in the past 18 months the balance of power had shifted to the employee.

“Their expectations have certainly changed,” he said, adding that one consequence was that the company had seen “people taking advantage of the flexible working that we offer to really integrate it in a much better way.”

Dawson said amid the “war on talent” right now, he saw flexible working policies as the “key source of competitive differentiation”.

As a result, the ways the office was used would change for good, as employees took the upper hand in defining what is “worth the commute”.

“That is evolving the way we think about our real estate strategy,” Dawson said.

“How do we provide a location to maximise the number of people that can be in an environment at an appropriate cost? It’s about how we evolve the workplace now to be a destination,” he said.

Dr. Nicola Powell, chief of research and economics for Domain, told Business Insider Australia runaway work-from-home trends necessitated by lockdowns may not easily bounce back. 

Domain’s research suggested for many businesses “going back to an office full time, five days a week is unlikely,” and this would have an impact on property in CBDs. 

“We know from a residential side the words ‘study’ or ‘home office’ have become such a trend since COVID hit. And that’s because it’s such a priority for home buyers, and now homeowners,” Powell said. 

According to a recent report by the Productivity Commission released in September, few workers prefer fully remote work, with current trends suggesting most organisations will land somewhere in the middle when it comes to returning to the office.

While the CBD will return, Powell said, what will change is how a growing number of organisations treat when the office is used, and what it is used for. 

“There’s no doubt that flexible working and remote working is going to remain a huge part of how organisations develop,” she said.

Photo by Israel Andrade on Unsplash