Crisis causes a rethink on CBD office space

A big hit on white collar employment from the coronavirus-caused slowdown is set to cut demand for CBD office space in the short term and trigger a broader rethink on how city workplaces are used.

By mid-2021, the level of white collar employment is expected to be close to 115,000 below the peak reached in the pre-COVID-19 upswing, according to a Deloitte Access Economics analysis. Across the country's CBDs, white collar jobs will number around 1.15 million in the coming year.

Extrapolating from that fall in white collar jobs into desks needed and CBD office space required is more difficult. According to Deloitte, CBD employment is expected to be slower to recover than overall white collar employment because the financial services sector, which dominates in the central city, is slower to rebound.

Working from home

As well, the increase in working from home and remote working, which has surged during the lockdown, is expected to become a long-term feature of mainstream employment even after the recovery.

A US survey by technology analyst Gartner, cited this month by Australia's largest office landlord Dexus, found almost three-quarters of companies intended to permanently shift at least some of their workforce off-site post the pandemic.

Locally, the country's largest law firm, MinterEllison, expects a third of its workforce to keep working remotely after the crisis. Twenty per cent of EY's 8500-strong staff have said they want to keep working from home.

Further complicating the puzzle of future office demand is the expectation that office densities will decrease, reversing the long-term trend and increasing the ratio of floor space per person, as concerns about disease transmission rank higher.

"There is no doubt going to be a slump in demand in the next 18 months and beyond that. As we come out of this, bigger corporates are going to be incorporating significantly more flexible working arrangements," said Deloitte partner Michael Williams, who consults to the financial services sector.

Those organisations that can offer their staff flexible working arrangements will have a competitive advantage in attracting better talent, Mr Williams said.

The coronavirus pandemic and the enforced working from home will become the catalyst for an even broader rethink on how CBD office space is used.

"We have just fast-forwarded to 2025. We have just leap-frogged five years. In technology adoption and ways of working, everything we said we couldn’t do, we have done," said Robbie Robertson, a Deloitte partner who consults on virtual offices.

One strategy now coming to the fore is the so-called "distributed workplace", through which firms harness more of their suburban real estate, allowing staff to congregate closer to home, reducing travel time and environmental impacts.

At the same time, city offices will become even more flexible and adaptable as workspaces – hubs for creativity and collaboration, according to Mr Robertson – in order to make the most of staff time and energy when they do get together.