Australian office tenant demand may record a net decline of 5% to 15% over the next three to five years, according to new Cushman and Wakefield modelling.
However, the long-term impacts of remote working will likely be absorbed by 2026 due to strong employment growth and additional space needed to accommodate new workplace strategies.
Cushman and Wakefield data showed that fewer than 15% of Australians wanted to be in the office daily, while half wanted to work in the office up to four days a week.
The popular work-from-home trend will mean tenants will likely have fewer staff in the office, which will lead to lower occupancy rates.
The decline in occupier demand for workspace is expected to be offset by strong predicted employment growth and a redistribution of space from individual desks to more interactive workspaces.
Based on Reserve Bank of Australia employment forecasts in 2022 and longer-term Deloitte Access Economics predictions, employment gains in major city centres of more than 10% are expected by 2026.
Employers are also expected to improve workspaces with more amenity and collaborative spaces in a bid to retain talent and drive productivity amid the low unemployment levels.
“Due to strong employment growth, changing space utilisation and the war for talent, we believe that WFH will not lead to large falls in occupancy across office markets in the medium-term,” Cushman and Wakefield Director Strategic Consulting, Australia and New Zealand Chris Marrable said.
“The war for talent and flight to quality will motivate occupiers to reengineer the office experience, whilst landlords should ensure their properties have excellent amenity with the flexibility to adapt to changing tenant needs.”
Tim Molchanoff, Head of Leasing, Australia and New Zealand at Cushman and Wakefield said they had seen an increasing trend towards tenants seeking to uplift their space to attract and retain good talent and encourage employees back into the office.
“While the smaller tenancies set the pace early, we are now seeing healthy enquiry levels among larger tenants,” Molchanoff said.
“That’s already supporting an increased need for space as tenants work through their longer-term flexible working policies and is expected to lift as the return to CBDs continues.”
The findings come after Property Council of Australia research showed that office tenant demand rose just 1% on average across Australia’s CBDs with every capital city except for Sydney and Brisbane.
The national vacancy rate increased 0.2% during the six months to January 2022, driven by an increase in supply of office space coming onto the market.