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The Office Is Here To Stay But Employee Experience Will Be Different, Says JLL

Businesses in New Zealand are re-examining their commercial real estate strategies after the government-imposed lockdowns and work-from-home arrangements resulting from the COVID-19 pandemic.

According to JLL’s global data, leasing activity softened with volumes 22% lower than in Q1 2019 as deals were cancelled or delayed. Asia Pacific leasing activity was in line with the rest of the world as Q1 2020 volumes were down only 9% quarter-on-quarter and up 14% year-on-year. However, this has yet to filter through to vacancy rates in Asia Pacific, which were flat compared to a quarter earlier at 10.9%.

“The current situation poses disruption and challenges for the office sector. The way people view and use corporate real estate will change. However, we can expect the office to remain at the heart of employers’ occupational strategies in Asia Pacific over the medium-to-long-term,” says Anthony Couse, JLL Asia Pacific CEO.

As companies prioritise the health and safety of their employees and implement social distancing to re-enter workplaces, changes to office real estate will be inevitable, according to a new report published by JLL. CEOs are re-examining strategies and may consider recalibrating the amount of space dedicated to traditional office space upon lease expiry, or even before.

JLL NZ Head of Office Leasing Graham Kristiffor says despite the current headwinds, the office is here to stay.

“It’s vital that businesses and investors remain pragmatic, take the time to see how the market adjusts, and avoid knee-jerk reactions. In fact, in some cases the pandemic may lead to an expansion of office space, as companies try to increase physical distancing among their employees,” says Kristiffor.

“Current office configurations may be modified, increasing the need for additional space. In doing so, occupiers may consider tapping into flexible space from third-party operators, alongside continued remote working for some employees.”

Not all remote working is created equal 

Despite a seemingly successful work-from-home experiment in New Zealand and around the world, offices will continue to be sought after. Although the pandemic has shifted perceptions around the effectiveness of remote working, it has not presented a sustainable or optimal long-term solution for all corporates.

It’s no secret that people in New Zealand have had struggles working from home including living in shared spaces, internet connectivity issues, or juggling family duties.

Kristiffor says that while remote working has been credited with providing employees with more flexibility and work-life balance, offices still play a central role in creating a space for employees to collaborate, interact and unite around shared values, boost staff morale and enhance productivity.

“Today’s businesses operate in an increasingly fast-moving environment where innovation is key to retaining a competitive edge and sustaining company performance. Successful companies pride themselves on having collaborative spaces that drive excellence and innovation,” says Kristiffor.

Demand for office design and fit-out

As the needs of occupiers evolve, the primary change that will hit offices is the redesigning of spaces. There will be a focus on delivering the highest and most efficient use of space to meet an organisation’s objectives.

JLL NZ Head of Project and Development Services, Ben Dalton says the situation has accelerated the evolution in office design.

“We have already seen clients shift their immediate attention onto wellness, technology and physical distancing. Recent trends in agile and flexible environments will continue to accelerate and evolve by understanding the benefits that we’ve learnt from remote working,” says Dalton.

For the office this will likely lead to a reduced densification of workstations but an increase in the quality and variety of meeting, interaction and focused work spaces, as well as continued investment in technology to allow a more connected workforce. Organisations who can adapt their existing office spaces to accommodate this will benefit greatly.”

Impact on flexible spaces and co-working

The flexible space and co-working sector may stand to benefit in the short-term as some present a compelling alternative to achieve short-and-medium-term expansion plans for existing occupiers looking for additional space.

Having a flexible business plan will align with certain occupier goals during the current environment, especially related to capital expenditure. However, corporates need to be diligent in selecting strong flex space providers, given projections around consolidation in the industry.

Meanwhile, some companies have been incorporating flexible spaces as part of their office portfolios to attract and retain top talent.

“COVID-19 is likely to accelerate the evolution of the office. Ultimately, it is people who are the end-users of real estate and we think offices will remain central to their daily business life. Looking ahead, we believe that this is a resilient sector that will continue to draw long-term investor interest and confidence,” concludes Dalton.

For more details, please download ‘Are we over-estimating impact of COVID-19 on Asia Pacific real estate’ report here.

 

 

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