Australia’s Empty Offices

The newspapers have been reporting record levels of office vacancies, while even social platforms like Instagram’s @TheAussieCorporate have followers spilling the tea on all the subleasing and empty desks in big buildings. With employees working from home or adopting flexible work schedules, office occupancy rates have plummeted. The once bustling office spaces now stand partially or completely empty, presenting a clear indication of changing times and forcing organisations to rethink their workplace requirements  

The Cost of Wasted Space

At the end of June 2023, JLL Research reported that 16.2% of Melbourne offices were left vacant, while in Sydney vacancies were at 14.4%. Taking Melbourne as an example, prime CBD rents fell 3.7% to $395 per sq m on a net effective basis, whilst incentives rose to a whopping 42% according to a separate report from Cushman & Wakefield. The tech sector is especially feeling the pinch. According to CBRE, the volume of sublease space available within tech sector properties has risen to 64,900 square metres, compared with 29,200 square metres a year ago.

Huge numbers, right?

That kind of explains why we’ve seen all these news articles from panicked landlords making ludicrous statements like come into the office or your job will be automated (lol). But the pressure is very much real. Businesses are left with under-utilised space and substantial rent expenses, alongside unused amenities and impractical long term lease agreements. Plus, there’s a self-perpetuating challenge here that quiet offices have very little buzz and, as a result, very little reason to want to come in, which can have a domino effect on company culture.  

The changing role of the office

That’s not to say that the office is redundant. In fact, it’s more important than ever before. It’s just that organisations are approaching new challenges with old mindsets. They assume the office is as it always was. But the role of the office has fundamentally changed. 

A lot of organisations and their CEOs are shaking the fist to get people back into the office. It’s a bit like an Oprah special – “you get a mandate, and you get a mandate”. One of the major reasons, we’ve been told, is that it’s because we’re not as productive as being in the office. This is a lie.

Data from the US Bureau of Labor Statistics, which tracked workers post-COVID return-to-office, found that productivity dropped when people went into their formal workplace. 

Why? Because the role of the office has fundamentally changed. 

Previously, work was where you went. You’d wake up in the morning and say “I’m off to work”. And while that saying may be hanging around in our vocabulary, it’s clear that work is no longer where you are. It’s what you do, irrespective of the place you do it.

Now, the office is a place for connection and collaboration. To build networks and relational capital, coming together in-person to enable working effectively apart. And when we look at the purist definition of productivity, which is output over time, we’re actually more productive working at home. 

If it’s not about productivity, then what?

Well, the home is best placed for deep thinking, getting through your admin, and writing that report. While the measure of success is not how much output you deliver, but about driving innovation culture, brand loyalty, psychological safety, and retention. 

We’ve been having the wrong conversation

It seems pretty straight forward. The home is better for some work and the office fills a different kind of void. So, if that’s the case, why can’t we get it right?

The thing is, the conversation has been treated as if it’s two completely separate and binary options in opposition of each other – home vs the office. It’s one or the other. When the reality is that hybrid working is all about the seamless integration of both, doing the right work in the right place to maximise value. 

Sure, some roles lend themselves to being entirely in the office full-time. And others can be done entirely remotely. But the real value, for most, is flexing between both.

Now back to the executives and their vested landlords who are shouting orders to get back in. When we mandate attendance, we’re putting place first and retrofitting the work to try to make it sync up. Whereas we should be focusing on the work first and place second. 

When we’re clear on the specific purpose, we can design our offices with much greater intentionality for much greater impact. And we can design our weeks accordingly too, so we’re not on video calls and consumed by our laptop all day when we’re in the office.

Adapting to the New Reality

While the challenges of empty office spaces are obvious, companies can adopt a range of strategies to adapt to the new reality to get the real benefits that come with hybrid work models:

• Flexible Leasing: Negotiating more flexible lease terms, such as shorter rental periods or shared workspace arrangements, can provide companies with greater adaptability in managing their office spaces.
• Tap into coworking: Depending on the size of your organisation, consider a coworking space for your headquarters with the built-in flexibility, or for larger organisations think about procuring a set of company licences to help manage overflow and provide options closer to home.
• New ways of working: Deliberately design new ways of working to meet the needs of customers, teams, and individuals, setting core expectations and identifying moments that matter while maintaining flexibility.  
• Repurposing Office Space: Redesigning office layouts to bring the new ways of working to life, built on a platform of connection and collaboration while ensuring spaces can be curated, moved and modified depending on what needs to be done to maximise efficiency and impact.
• Embrace Technology: Utilising technology to monitor occupancy, analyse space utilisation, and optimise office layouts to make informed decisions about their space requirements.
• Employee Well-being: Investing in employee well-being initiatives, both in the office and remote environments, to foster a positive work culture and maintain employee engagement.

The growing trend of vacant office spaces highlights just how much is changing and, with that volatility, the importance of flexibility. It’s about recognising that the office is not a place of productivity but a shared environment for connection and collaboration that, when intentionally integrated with the benefits of remote work, can supercharge outcomes for organisations and teams. 

Ben.