According to the latest Office Occupancy Survey by the Property Council of Australia, the amount of staff heading back into the office has nearly tripled between Jan-Feb 2022, increasing from 7-18%. And by this time next year, it is anticipated this number will reach 100% in major CBD areas including Sydney, Melbourne, and Brisbane.
Despite these numbers, I believe many people will be seeking greater flexibility from their employers into 2023 and one of these options will be the four-day work week. Four-day working weeks are quickly becoming adopted by many organisations across the world including Panasonic and Kickstarter. However, while the popularity of this concept grows in Australia as many workers start calling on greater flexibility from their employers, it’s important to understand the impact this would have on our commercial property landscape.
VALUE OF COMMERCIAL PROPERTY WILL STILL INCREASE
Regardless of whether people worked in the office for four or five days, office spaces will always be essential to the makeup of a CBD environment, and therefore they have value. Over the next few years, the commercial office space will likely see immense growth due to the changing nature of work. Yields at office spaces are around 1-1.5% higher than warehouses at the moment, and this is fantastic as it means greater returns and capital gain over time for investors.
INTRODUCTION OF SATELLITE OFFICES
If people were working less during a week, we are likely to see similar patterns of people continuing to relocate to regional and rural areas, like they did during COVID-19 lockdowns. While this can potentially be detrimental to CBD office life as we know it, it also creates a unique opportunity for smaller ‘satellite’ offices in regional areas. Satellite offices essentially means that businesses can downsize their CBD office space and re-allocate that square footage towards smaller offices in wider regional areas. For example, a Sydney-CBD based company could downsize their city office and buy/lease-up additional space on the South Coast, Newcastle or out west.
HUGE GAP IN THE MARKET FOR OFFICE-SPACE DISRUPTORS
If the four-day work week was introduced, this would create a big gap in the market for potential office-space disruptors to come in and create unique workplace concepts. Companies such as WeWork have proven that office buildings pose real opportunities for the future of flexible work, so with a plethora of free meeting rooms, offices, and parking available amidst a four-day-work week schedule, this would create a real gap for entrepreneurs to create clever solutions for current problems.
SAY HELLO TO SHORTER LEASES
One of the fantastic things about commercial property investment, is that you are able to secure longer leases with your tenants, as opposed to residential, which normally needs renewing every 6-12 months. However, even if a four-day work week was introduced, most businesses would still be required to pay full-price for their leases, meaning that they may look to renew more frequently; meaning less security for landlords. In a four-day work week, it would be likely to see commercial leases last as long as residential as businesses will need the ability to scale their needs up or down often. The upside to this though, is that the tenant may be willing to pay more for flexibility and subleasing will be more common. It also allows for co-leasing, which is a great opportunity for multiple smaller businesses who still desire a CBD office.
INVESTORS UP FOR HUGE PAYDAY
As discussed, the commercial property sector is not slowing down, regardless of hybrid work or 4-day work weeks. At the end of the day, regardless of trends or fads, realistically our office life will bounce back. As Australians we have short term memory, so in about 10 years’ time, most of us are likely to be back working full time in the office. Smart investors should see the opportunity that exists now to buy up office spaces while prices are low. Going against the four-day work week trend will see you obtain far greater returns in the long run.
