After 10 months of working remotely, it was a relief to finally return to the office. I was looking forward to the buzz of our Collins Street location, speedy internet, an ergonomic chair and most importantly, seeing the team. But I have to admit, I was slightly apprehensive. How would my feet cope wearing proper shoes all day?
Putting aside this trivial (but very real!) issue, any concerns I had were quickly put to rest. Returning to the office has been a stark reminder of just how integral a bricks-and-mortar environment is to a strong corporate culture, plus a heap of other things.
Firstly, there are no technical glitches! I love seeing the unfrozen faces of my workmates and hearing their voices clearly and uninterrupted. It made me realise how a screen creates boundaries, stilting the pace of overlapping conversation and the bouncing of ideas. And sharing in person is so much more effective when you can perceive the nuances of body language and eye contact.
Bumping into people outside of my immediate team adds another layer of learning, insight and comradery that can never occur when working from home (WFH). It’s the unexpected interactions, quick chats and ability to perceive people’s emotions without barriers that has convinced me how important an office culture is for not only productivity but the simple joy of social interaction and stimulation. And I don’t have to utter the words “You’re on mute” into an unhearing void.
That’s why I think headlines spruiking the death of the office are a vast exaggeration that oversimplifies a complex topic. Whilst there’s no doubt the pandemic highlighted the benefits of a more flexible way of working, it’s also exposed why we so desperately need an office culture. Collaborating with colleagues in an office environment encourages a spark between people. When we’re in each other’s presence, we get a sense of belonging, with opportunities for deeper learning and understanding.
Flexible working conditions have been espoused for many years, but the lockdowns of the pandemic pushed a concept into widespread practice. Many of us found we had more time, more money and less stress without the daily commute. But for most of us, WFH was far from appealing on a full-time basis. Isolation, an absence of structure and professional development, coupled with a less-than-ideal home office environment, left many of us begging to come back.
Everyone’s situation is unique and it’s wrong to assume that everyone wants to WFH, or that everyone has the privilege of being able to. To the big question: If we assume employers will permanently embrace a more flexible hybrid approach, melding working from home with the office, how will this impact demand for office space?
In the coming months, we’ll be writing and talking about the future of office in detail. It’s a rapidly evolving area, packed with nuance and uncertainty, making it difficult to predict exactly what will happen. However, there are two things we can be certain of.
Firstly, how much and what type of office space is used will change. Whether tenants redesign existing space to cater for more collaborative teamwork and less individual workstations, reduce their CBD footprint and take up more affordable space in metropolitan areas, or simply decide to shrink their square metres altogether, office space in a post-pandemic world will be different to the environment that preceded it.
Secondly – and I can say this categorically – the office is not dead. Two of Australia’s largest listed office landlords recently reported their results. Dexus and GPT, owners of some of the highest quality office assets in Australia, reported occupancy rates of 96% and 98.4% respectively, along with a strong six months of leasing activity. GPT in particular noted that “at this stage there has not been a noticeable shift to downsizing with 70% of deals done with no change in space requirements”. With white collar employment back above pre-COVID-19 levels, the fundamentals are in decent shape.
We’re just one tiny example. APN Property Group has no intention of saying goodbye to our office, nor will we reduce our space. Other companies are doing things differently, with some considering shedding space or pondering other options. But there are no signs of tenants making sweeping calls to send their staff to permanently work from home because businesses recognise just how important an office it is to culture, productivity and the bottom line.
It’s also a mistake to view the sector as one big conglomerate. The quality, cost, location and appeal of Premium, A, B, C or D-grade buildings varies significantly – as do the opportunities for investors, which are far from obvious. This is a complex, changing environment for investors reliant on commercial property for a steady income stream.
But with risk comes opportunity. AREITs are one of the few sectors yet to fully recover from the lows struck in March. And yet, as the results from Dexus and GPT show, commercial property, including the much-maligned office sector, isn’t on its knees.
The APN team, with more than 23 years’ experience in real estate markets and now back in the office, is currently trawling through the opportunities and finding a lot to get excited about.
With interest rates at record lows, there has never been a greater difference between the risk-free rate from bonds and the yield available on AREITs. The current running yield on the APN AREIT Fund, for example, is 6.15%1.
I’m talking to clients and advisors about that rarest of things these days – a really attractive yield. But to be able to do it in the office, with my colleagues around me sharing the excitement, is truly wonderful. It might seem weird to say it, but it’s a joy to return to the office and no longer utter the words “you’re on mute!”.