A report on how office property will remain relevant post-pandemic, especially in QLD’s capital city.
Since COVID-19 introduced flexible work arrangements to many business in Australia, the future of the physical office space has been in question.
But a recent survey by the Property Council of Australia (PCA) showed Australian office owners and occupiers see office space as more relevant than ever – specifically in QLD’s capital city.
“Office is dead” is an eye-catching headline. But the truth is, the office is alive and well.
Read our report on the future of physical office space in Brisbane CBD to learn more.
Hundreds of thousands of white-collar Australians took up office on couches and kitchen tables during 2020. Thanks to COVID-19, remote and flexible work arrangements were on the tongue of many employers, while both property investors and business owners questioned the need for physical office space.
Now the coronavirus is retreating from Australian shores, what does the future of office space look like?
Are office workers destined to collaborate via video software, like Zoom and Microsoft Teams? Are CBD-based businesses reconsidering their need for office space? Is the boardroom dead?
Well, it turns out the future of physical office space in Australia looks bright.
A recent survey by the Property Council of Australia (PCA) showed Australian office owners and occupiers see office space as more relevant than ever. Team culture depends on a centralised office location, and there are figures to prove they are backing up their claims (Hint: Office occupancies are on the rise).
The PCA survey also highlights Brisbane’s CBD office market, QLD’s commercial hub, is undergoing an exceptional rebound, leading the charge for Australia’s office property market. The state has seen a quick return to normal (albeit a somewhat ‘new normal’) since September 2020, and there is good reason to say this momentum will continue.
With this white paper, we’ll show the ‘Why’ behind the Brisbane CBD office market’s revival after the pandemic. And for investors, we’ll attempt to prove office property in Brisbane CBD remains a brilliant counter-cyclical investment.
1. QLD recovery ahead of the country
Many elements of household life have been somewhat normal for Queenslanders since July 2020. Only around 1,000 COVID0-19 cases were confirmed in Australia’s most populated state throughout the year, and the minimal amount of community spread aided QLD’s recovery.
Brisbane businesses showed the quickest growth in Business Confidence in June 2020, according to the Roy Morgan Business Confidence index, when the coronavirus was still prevalent in other states. QLD saw a 14.6% uptick in Business Confidence in July 2020 – the highest increase of any Australian state.
COVID-19 was short lived in QLD. And this means QLD is expected to see a relatively quick return to positive economic growth compared to other states. Importantly, the trend had already started, with the state recording its strongest economic growth in almost a decade prior to COVID-19.
Thank QLD’s physically and sectorally diverse economy
QLD’s economy is only 50% reliant on the Brisbane CBD. Compare this to Sydney’s CBD, which adds 70% to NSW’s economy, and Melbourne’s CBD, which adds 80% to Victoria’s.
Beyond professional services, finance, and IT, QLD is a state driven by mining, construction, education, and tourism. While tourism has been unable to rely on its usual influx of international travellers, the economy has remained head-above-water thanks to these other pillars.
Furthermore, the state’s largest employer is its health system, with over 350,000 workers in the industry. The majority of QLD’s workers had plenty to do regardless of the pandemic outbreak.
So, despite short-term closures to retail and businesses in the state’s metropolis, QLD has been able to keep their sights on progressing the state’s initiatives, with key infrastructure to drive the economy forward.
Household spending stayed buoyant during 2020
Despite the interruption to QLD’s economy and regular life, household spending was higher than any other state during the most concerning phase of the coronavirus. Consumption expenditure in QLD was the strongest out of any state between March 2020 and June 2020.
2. Brisbane office occupancy on the rise [PCA]
Office markets around the country have been the subject of concern since the pandemic arrived on Australian shores in early-2020. Questions about the relevance of office space have become increasingly common: Will we see an office extinction in the near future? Will work-at-home arrangements strangle the need for office space?
The answer to both questions is apparently no.
The Property Council of Australia (PCA) obtained 102 responses from members who collectively own or occupy the majority of office premises in Australian CBDs.
According to the PCA, it appears workplace occupancy is finding momentum, as CBD offices in every Australian city (except Melbourne, due to its recent second pandemic wave) saw an increase in occupancy between September 2020 and October 2020.
National office market occupancy rates
Brisbane led the charge for the major cities, increasing from half-occupancy in September 2020 to 61% occupancy in October 2020. More businesses are expected to fill up office chairs as we turn the corner into 2021.
“This is encouraging news,” the Property Council of Australia’s chief executive Ken Morrison said, “given the critical role of CBD-based businesses in supporting jobs and economic activity. Including all of those businesses which depend on CBD workforces for their viability.”
3. New CBD supply creating jobs and new amenity
Brisbane CBD will see a major injection of new office space in 2021. And it comes in the form of a new 27-story, 24,000-sqm start-of-the-art building, already confirmed to be fully occupied by the Australian Tax Office.
The project on the corner of Astor Terrace and Wharf Street, in the high-growth precinct of Spring Hill, will bring thousands of workers to the area and underpin a resurgence of retail, health, childcare, medical, and amenity to service the growing population and expanding catchment.
Coffee shops, hairdressers, childcare, and retail sectors are all likely benefactors of the fully pre-committed ATO building due for completion in 2021.
Spring Hill is known as a precinct requiring gentrification, and this new landmark site confirms it. The area is increasing in relevance and will be a targeted area for businesses looking for new office space post-coronavirus.
4. Demand moving toward smaller floor plates
Office demand in Brisbane CBD will change. But not in the way many think.
Interestingly, during the height of the coronavirus in Australia, some occupants used up more sqm than previously required. Social distancing and safe workplace rules meant only a portion of desks could be used at any one time, and this artificially boosted the amount of space required for businesses.
But now that Brisbane and the rest of Australia are on the road to normality, many businesses are looking for a more permanent strategy to both ensure their team has a centralised location to work from and to remain nimble if the need arises for flexible work arrangements.
For this reason, it’s widely expected the demand for office space will decentralise from the 1,000 sqm floor plates typically offered by CBD buildings, and move towards smaller floor plates of 700 sqm and under.
Smaller floor plates provide a greater ease of accessibility. And as an additional bonus for tenants, it means cheaper rents, without the need to compromise on location.
5. Physical office space is central to corporate culture
According to the PCA, another reason office space is likely to remain highly relevant in the Brisbane CBD (and the rest of the western world) is the importance office occupiers and owners place on a central location for their workers.
Of the respondents in PCA’s survey, 96% see the role of physical office space as key to creating a corporate culture. Many say the physical office environment is a crucial driver of job satisfaction, productivity, and collaboration.
But more than this, the physical office is a place for mentorship and on-the-job learning. To teach the next generation to lead effectively, business leaders and mentors must show them the way, rather than merely tell them.
On a granular level, many of us who worked from the couch or kitchen table during COVID-19 could write a long list of the challenges faced from the home office environment.
An ironclad argument in favour of the physical office space is that the human need for relationships and belonging seems to outweigh the temporary desire for remote work arrangements.
Office CBD occupants get government support
The federal government is just as wary of the role physical office space plays. Not just for individual businesses, but for the nation’s economy.
In September 2020, prime minister Scott Morrison urged the return to office in a bid to “get our CBDs humming again”. The backing from the Australian Government is a vote of confidence for the future of office real estate.
While we’re unsure in what capacity, we’re certain that one government mandate will be to support the future of the office real estate market.
What does this mean for office property investors?
The office property market is heating up, as Australia’s concerns around the coronavirus cools down.
Just like frightened investors missed out on some amazing opportunities in Melbourne, many investors have opted to sit on the sidelines while high-quality office investment opportunities pass them by.
It is somewhat understandable, given the media-driven fear and the inability for many to conduct deep research into the true happenings of the Australian commercial property market. And this is both a shame and a blessing.
It’s always sad to see investors miss out but this also leaves opportunities – opportunities for those property fundamentalists who look into medium-long-term horizons and can see value where others can’t.
These hands-on property professionals know how to create value, while others merely witness it.
Want to take advantage of high-quality Brisbane CBD office?
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We’re perfectionists and leave no stone unturned when seeking out incredible investments with high potential for capital growth. And right now our sights are set on the great opportunities in Brisbane CBD’s office market.
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