March 2022 – Please be aware of scammers falsely representing AMP Capital. AMP Capital is aware of an ongoing scam operation targeting customers and the broader community, offering inflated interest returns, available through fictitious investment vehicles, titled AMP Capital High Yield Fixed Return Global Market Fund. Through the use of phishing emails and phone calls, malicious operators are attempting to entice them to invest in a false product that features AMP Capital’s branding. Please be aware this is a not a legitimate product from AMP Capital.

AMP Capital does not approach potential customers via electronic direct mail (EDM) nor does the company solicit personal or financial information via email. If you are concerned that you may have been targeted by scammers, please contact us on 1800 658 404 from 8.30am to 5.30pm Monday to Friday (Sydney time). More information on scams can also be found on the ACCC’s website Scamwatch.

Real Estate

Future of work: how the office is adapting to change

By Christina Malcolm
Leasing Director

It has been a torrid two years for the office real estate market amid COVID lockdowns, work from home orders, mask mandates and rapid testing. But with the Sydney and Melbourne CBDs posting the highest quarterly demand since late 20181, things are looking up.

The better-than-expected office demand has caught many by surprise. By June 2021, as Sydney was entering what would turn out to be its longest lockdown, it appeared as if an emerging recovery was to be short-lived.

Instead, the Sydney CBD office market was buoyed by a reduction in sub-lease vacancy, which reduced by 50,000 sqm (36,000 sqm in the third quarter alone) from its peak of 170,000 sqm in the fourth quarter of 20202.

Driving the change was an apparent underestimation by many tenant-customers of just how much space they will require in the future. And with both Sydney and Melbourne experiencing their first taste of freedom during October, the ‘open for business’ signs started appearing as organisations slowly encouraged their staff to return to the office.

But questions remain. What does the future of work look like? How enthusiastically will the CBD crowd return to the office? And what will the long-term impacts on demand be from the great working from home experiment?

Remote working

In terms of remote working, it looks like the approach varies widely from industry to industry and among individual companies.

A ‘one-size-fits-all’ approach to remote working remains elusive and it will take time for companies to figure out what works best for them.

In the short term, employee feedback is driving decisions, but longer-term preferences remain unclear — and are likely evolving.

According to a survey of Australian office workers, the preference to work from home dropped from 1.9 days per week in October 2020 to 1.5 days per week by March 20213.

Our estimates are that the office market should be able to absorb greater work from home requirements, noting that many organisations already offered flexible working arrangements prior to the pandemic.

The hybrid workplace

A key change will be the emergence of a new hybrid workplace that allows people flexibility in how they work from day to day and task to task.

Many offices are not designed with collaboration or team engagement in mind — instead office design has focused on space productivity and densification. We think this trend will reverse.

Collaborative spaces and an emphasis on amenities to promote health and wellbeing should reverse the trend to densification. Access to flexible workspaces — multi-purpose shared spaces that can be used for seminars, collaboration and projects — supports businesses by providing spaces that they otherwise would have to hold within their actual tenancy. This will mitigate the impact of greater remote work on overall space requirements.

While greater workplace flexibility is here to stay, we believe the impact on overall space demand appears to be less than initially anticipated. In our view, well-located prime assets that cater for a shift in tenant preferences towards greater amenities, health & wellbeing, as well as offering quality sustainability credentials, will benefit from the tenant relocation to prime assets.

Tips for tenant-customer

A new research report by Brickfields Consulting4, commissioned by AMP Capital with customer insights from across the office portfolio, provides some insight into how tenants are planning for the future of work.

The value of the office is clear. Compelling office experiences are part of a future that will lure people back to the office. Flexibility is here to stay, but people are increasingly taking a nuanced view of what flexibility means. It is no longer merely about the opportunity to work from home.

Workplace flexibility sees people choose which premises to work at day to day depending on their needs, from an office to a shared collaboration space to a local cafe. Cultural flexibility sees people choosing which cultural holidays are important to them and allowing them to take public holidays at a time that suits their beliefs. Time flexibility may also allow people to choose to work early in the day or later in the evening to cater to family obligations or perceptions of their own productivity.

And wellbeing will be a priority beyond the narrow focus on COVID safety. Mental health and wellness is now the number one societal issue for by Australian employees5. Businesses will have to address employee wellbeing in a range of ways — from creating opportunities for social connection to access to mental health support and generous personal leave entitlements.

Brighter days ahead

We expect 2022 to mark a turning point not only in market conditions but also for the sentiment towards the sector.

We estimate existing tenant pre-commitments in the Sydney CBD to drive more than 60,000 sqm of positive net absorption this year. Alongside expected strong job creation and improvement in office attendance, this is expected to drive a solid rise in office demand and a subsequent drop in vacancy. We should then see the market return to positive rental growth.

Similarly, Melbourne CBD is also expected to see an improvement in market conditions but is likely to lag Sydney in the short-term given current vacancy levels.

1. Q3 2021, JLL Research
2. JLL Research
3. JLL Research
4. https://www.ampcapital.com/adaptingtochangeintheworkplace
5. 2021 survey conducted by technology firm Atlassian and PwC


Subscribe to Institutional Investor using the form below to receive all of my articles

Christina Malcolm, Leasing Director
  • Covid-19
  • Insights
  • Institutional Edition
  • Real Estate
  • Real assets
Share this article

Subscribe to our Insights

Here's what we found for you

Here's what we found for you

Here's what we found for you

Here's what we found for you

Our Privacy Policy explains how we handle personal information and use cookies and website tracking. We will follow the cookie and tracking settings you have selected in your browser.

Important notes

While every care has been taken in the preparation of this information, neither National Mutual Funds Management Ltd (ABN 32 006 787 720, AFSL 234652) (NMFM) nor any other member of the AMP Group makes any representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This email has been prepared for the purpose of providing general information, without taking account of any of your objectives, financial situation or needs. You should, before making any investment decisions, consider the appropriateness of the information in this email, and seek professional advice, having regard to your objectives, financial situation and needs.

Cookies & Tracking on our website.  We use basic cookies to help remember selections you make on the website and to make the site work. We also use non-essential cookies, website tracking as well as analytics - so we can amongst other things, show which of our products and services may be relevant for you, and tailor marketing (if you have agreed to this). More details about our use of cookies and website analytics can be found here
You can turn off cookie collection and/or website tracking by updating your cookies & tracking preferences in your browser settings.