How landlords are falling short on keeping office workers happy
While it may be an office landlord's paradise with low vacancy rates, it is still important to keep tenants happy, particularly when new buildings come on stream in the next few years, according to tenant representatives.
This is equally important for future-proofing older properties in the new age of flexible working environments.
Making its mark: New offices at WeWork's 5 Martin Place, Sydney, site.
When it comes to capturing tenant loyalty, many landlords are falling short in key area such as wellness, base building services and providing a better customer experience, CBRE's first Australia Occupier Survey has identified.
The survey concludes that landlords shouldn't assume that their "stayers" are happy. "Smart buildings" with more advanced IT platforms are becoming increasingly critical in future workplace decisions.
Dexus Place, level 5, One Margaret Street, Sydney, where tenants can lease new office meeting facilities. Image supplied. DEXUS Place business lounge and breakout area
The survey findings are based on interviews with 100 senior decision makers in larger organisations and ASX 200 companies, occupying an average office size of 5,600 sqm.
CBRE associate director, research, Felice Spark, said the purpose had been to identify and measure the current and emerging factors driving occupiers' "stay or go" decision making.
This included future real estate strategies, how workplace formats were evolving and whether or not wellness was delivering better business outcomes.
"One of the key findings was the heightened focus on wellness, with 74 per cent of respondents indicating that they would value a wellness offering in their workplace," Ms Sparke said.
CBRE director, workplace strategies, Matt Strudwick said the findings highlighted that companies were increasingly viewing the workplace as a "service" rather than pure bricks and mortar.
"The 'workplace as a service' thinking is seeing the rise of flexible options such as WeWork, a demand for more services and amenity such what is on offer at DEXUS Place and, importantly, a desire for the building's to be smart," Mr Strudwick said.
"Occupiers are looking for buildings which can help them do everything from order a coffee from their desk ready for pick up as they head out of the door, through to data that can help them understand the demand patterns of their people."
As workplace strategies have shifted from the traditional office model to Activity Based Working (ABW), the workspace allocation per employee has dropped from about 25 square metres in the 1980's to 12sqm or less under ABW workplaces today.
When it comes to capturing tenant loyalty, many landlords are falling short in key area such as wellness, base building services and providing a better customer experience
CBRE's first Australia Occupier Survey
Many new builds are now planning for only 8-10 sqm of office space per person.
A JLL paper, titled 'Future proofing your asset to attract new tenants – A guide for building owners' also explores the implications of less square metre space per employee.
The shift towards occupant densities of 8-10 sqm per person will place a substantial additional load upon B and C-grade buildings which typically have been designed for ratios of 15-20 sqm per person.
With Property Council of Australia figures showing that more than 60 per cent of commercial buildings in Australia are classed as B, C & D-grade, these older buildings need to keep pace with changes in workplace strategies and building technology or risk becoming obsolete.
Craig Mason, JLL's state manager for project & development services in NSW said, new workplace models have typically only been implemented in A-grade office space.
"However, strategic investment into a B or C-grade building to make it more efficient will widen the appeal of the building to a broader range of tenants and future-proof the asset as workplace and technology trends become entrenched in the market," Mr Mason said.
"Upgrades of existing buildings to suit agile working environments can be completed while the building remains occupied, with careful planning and execution."
"The internal rate of return (IRR) on investment on upgrades varies depending on circumstances of particular projects, however is typically of the order of 10 to 20 per cent per annum."
Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.