• Commercial real estate advocates want Australia’s white-collar workers to return to the office, but new data shows many expect to stay at home.
• A preference for flexibility and lingering COVID-19 fears are keeping workers from the office, and broader economic factors mean businesses are downsizing their holdings.
• But the Australian office environment might not be obsolete, with analysts suggesting falling rents could spark a “flight-to-quality”.
• Visit Business Insider Australia’s homepage for more stories.

Major players in Australia’s commercial real estate sector are pushing for white-collar workers to return to the office, after the coronavirus pandemic emptied city centres and the towers crowding their skylines.

But new data suggests Australia’s professional class will cling to remote work for months to come, with a considerable percentage of office lease-holders expecting to downsize in 2021.

Now, as Australia stumbles into post-pandemic life, the nation’s $1.2 trillion commercial real estate sector must contend with the fact that some out-of-office emails will be staying on.

Early knock-offs and office enticements

Australia’s office residency remains suppressed. Melbourne’s CBD offices stood just 24% full at the end of February, according to the Property Council of Australia (PCA).

Sydney’s inner-city offices reported 48% occupancy. While professionals have returned to other metro areas nationwide with more enthusiasm, workplaces are still struggling to hit pre-pandemic occupancy levels.

The glut of empty workplaces has become a problem for the PCA, which represents heavyweights of Australia’s real estate industry.

To boost office occupancy — and ensure rents for corporate landlords — the PCA has suggested Melbourne businesses enshrine shorter Friday workdays, an incentive they believe may lure workers back to the CBD.

They’re not the only vested interest who want businesses to corral their teams back into the office.

Speaking to The Australian, Kylie Rampa, Lendlease’s Australian chief executive for property, said employers must “earn the commute” of their workers, and “make it exciting for people to be back in the office.”

The data suggests it might take more than early knock-offs to get the job done.

The work-from-home generation

On Wednesday, the Australian Bureau of Statistics (ABS) reported an astonishing 41% of employed Australians worked from home for at least one day a week in late February.

And workers think the trend to continue. Nearly half of survey respondents said they expected their work-from-home patterns to carry on, with 8% saying they wanted to increase their out-of-office workload.

COVID-19 restrictions were a key factor for Victorians, who were plunged into a five-day snap lockdown at the time of the survey.

But nationwide, respondents showed a strong preference for the flexibility afforded to them by new working arrangements.

Business are responding — and downsizing.

In its 2021 Office Market Outlook, released February, commercial real estate juggernaut CBRE reported the vast majority of office-holding businesses expected to minimise their holdings in 2021.

While a move to work-from-home arrangements is a major factor in those downsizing decisions, it’s hardly the only one.

“Although the question remains on what a hybrid/remote workforce will look like and what its impact to office demand may be, workplace occupancy will continue to be influenced by the containment of COVID-19 and the rollout of vaccination programs,” said Joyce Tiong, CBRE’s Associate Director-Head of Office Occupier Research for Australia.

And in bad news for commercial landlords, “tenant demand will continue to be impacted by occupiers seeking agile solutions or footprint reduction to lower costs,” Tiong said.

The winding down of the JobKeeper subsidy and eviction moratoriums at the end of March may further jolt the commercial rental market, she added.

These potential flow-on effects were noted by tenancy representation group Tenancy CS, who this month said “uncertainty and low business confidence means more tenants are demanding shorter leases, transparency and break clauses.”

A return to normalcy?

The humble office has seen better days: White-collar workers are now acquainted with remote work, and full office occupancy is unlikely while Australia’s vaccine rollout is in its infancy.

Yet there are some promising signs for Australia’s commercial landlords.

“Greater incentives and more affordable rents may encourage the flight-to-quality and flight-to-centre trends,” Tiong said, suggesting some discount deals may be too good for firms to pass up.

Meanwhile, increased subleasing may see smaller companies partially fill the gap left by downsizing firms, Tenancy CS noted.

Office advocates, like Lendlease’s Rampa, also assert work-from-home arrangements don’t foster the same team-building environment that communal spaces can.

With unemployment dropping faster than expected and job ads surging, Australia’s office culture may eventually clock back in.

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