Occupier Survey – How do Australia & New Zealand fare?
Featuring Janet Martin, Tom Broderick & Tristan Gannan
Thursday 16 June 2022
JM:
Hello and welcome to Talking Property with CBRE. A podcast in which our team of experts are clients and industry specialists share insights into the way we live, work and invest through the lens of my favourite topic, commercial real estate.
My name is Janet Martin. I'm the Pacific Regional Director for Workplace Strategy and Change Management, and I'm your host for today's episode. Today we are chatting about CBRE’s latest research report, the Pacific region's component of the CBRE Asia Pacific Occupier Survey which was conducted over March and April in 2022.
Here with me to talk about the insights, trends and numbers, we have Tom Broderick, who's a Head of Office and Capital Markets Research. Hello, Tom.
TB:
Hi Janet.
JM:
Tom authored the report, we also have Tristan Gannan, who's our Director of Advisory and Transaction Services for Occupier, and he heads up our New South Wales team. Hi, Tristan.
TG:
Hi, Janet.
JM:
First of all, I'm going to start off with Tom. So, Tom, please tell me just briefly in an overview, tell me about the survey and the group of occupiers who were involved.
TB:
So this is the third occupier survey that we've done across APAC. There was a total of 151 respondents across the region this time around, and of those, 43 have offices in Australia and New Zealand.
In terms of the sectors for these occupiers, it was fairly diverse. There was 28% from financial services, 26% from tech media and telecommunications, 23% from professional services and the legal sector, and then the rest was a broad mix of other sectors.
JM:
It's a good spread, that's a nice, diverse mix. Good intel.
So, Tom, it's been said that the return to office, the momentum for that is gathering pace in Australia and New Zealand and I'm curious, does that hold in terms of the key trends from the report?
TB:
Yeah, look, I think it's been a fairly bumpy ride across both Australia and New Zealand in 2022, in terms of the return to office. We've obviously had Covid waves and then in Australia on the East Coast we've had the weather impacts and flooding which is affected that return to office, but certainly it seems to be underway.
I think the PCA statistics that came out confirmed that basically every major market has seen at least 10% increase in occupancy during May, and that's certainly what our surveys suggesting as well.
Interestingly, in our region, 33% of the occupiers said that they're actively encouraging staff to return to the office. That's a bit lower than what the rest of Asia was saying and also below what the Americans are doing as well, but 35% of our occupiers said that they're looking to encourage staff to return back by the end of 2022 so it is progressing in our region. I think the most interesting takeaway for our region was that we had a high proportion of occupiers who are more willing to allow a kind of organic return to the office rather than the encouragement and mandate of other parts of the world, so that's kind of an interesting takeaway for Australia and New Zealand,
JM:
That fits with what I'm hearing too. So you hear that in Asia there's differences between Asian based companies and Western companies in terms of their approach to either mandating or encouraging, and equally there's been some interesting tweets, I think, led by Elon Musk, with some varying views on whether it should be mandated that people come to the office for 40 hours a week. So I think it's fair to say, in Australia and New Zealand there's probably more of an encouragement as opposed to mandate, but we'll see how that plays out.
My question going on from that is most respondents to the survey in October 2020 anticipated that their staff would be working from home almost two days a week. So 1.9 days per week and that response has changed now down to 1.7 days, which may not seem like a lot, but it's significant. So, Tom, I'm curious. If people now anticipate that staff will be in the office more, how does this impact on the configuration of future offices?
TB:
Yeah, I think these results were quite interesting compared to previous surveys. So what we asked in the survey was, how often do you anticipate your employees to work remotely? In the other two surveys, there was really no consensus on working from home. Some occupiers were saying, never work from home. Some were saying, basically all the time and then there was a range in the middle.
I think in the most recent survey what we've seen is there's a lot more conviction from occupiers around hybrid working 90% are sitting in the middle, so saying that they expect employees to work anywhere from a few days a month to 2 to 3 days a week from home and basically there's almost no one at the extremities anymore, saying full time in the office or full time at home. So that's a pretty clear difference in the most recent survey.
As you mentioned in terms of the average days it has dropped. So in our first survey it was 1.9 days per week. Now it's 1.7 days per week per employee, and I would expect that to continue. As I mentioned in the previous question, there's still a lot of occupiers who will be encouraging people to come back to the office in the back end of this year and so I would expect that average days per week to drop as that happens. The impact to the future of office space, I think the pretty clear response that we saw in the survey was that occupiers are expecting to increase unassigned seating and decrease assigned seating. During the pandemic, so that trend was happening pre-Covid and then during the pandemic, there was a bit of debate about whether the trend towards unassigned seating would reverse because people were a bit more concerned about Covid and hygiene etc.
But these survey results suggest that occupiers are now doubling down on assigned seating and reducing assigned seating and that makes sense to me because I think they've got more conviction around hybrid working. So it makes sense to increase unassigned seating and increase desk sharing ratios, for instance.
JM:
Which is good, good news because I think that a discussion for another podcast is the immense benefits that come from face to face contact. Thanks for that, Tom.
Tristan, I'm going to turn to you now, So I'm aware that you're seeing and hearing things on the ground with your clients. So I'm curious. What are some trends that you are seeing in terms of what's requested or needed from your clients?
TG:
Look, I think the pathway towards hybrid working is not something that's new. So most organisations were on that trajectory before the pandemic and what Covid has done is really accelerated their move towards hybrid working. So if you think most companies operated in an open plan environment before 2020 and what they are now moving towards is unassigned seating, so the move from open plan to want to sign is a relatively small step. However, one sector which is experiencing a bigger change is the legal industry, where we're seeing a move away from not just being an individual offices to open plan, but from being an individual offices to open plan and undersigned seating and there's quite a big change management piece that's required to support that.
JM:
I think you're right with that and in fact, you and I are working together on a couple of those projects, aren't we?
I think it is an interesting shift for people and also increasingly, I'm saying that booking systems now relate to whole teams rather than individuals. So there's a focus now on wanting people to be really deliberate and intentional when they come to work, to connect with others as opposed to coming into work and potentially doing things that they could do at home or elsewhere.
In the report, it's interesting that a third of Asia Pacific respondents with one office in Australia and New Zealand expect to expand and we're talking in terms of the amount of space they're using and companies solely based in this region have even more of a leaning toward expansion. So 40% of respondents were expecting to expand, as opposed to 36% who were expecting to contract.
So Tristan, do you have any comments on that?
TG:
It depends on the scale of the organisation. So if we look at what companies have done since the onset of the pandemic, what we've seen is the smaller organisations who occupy less than 5000 square metres, on average have grown by about 10%. Versus the larger organisations who occupy more than 5000 square metres seem to have decreased their footprint by about 5%. So overall the trend seems to be that the companies are staying at roughly the same footprint that they had pre-pandemic.
I think it's important to bear in mind that companies have performed very well over the past two years and so we've seen their workforces grow quite significantly. So whilst employees may not be coming into the office as frequently as what they did, the offices are working harder to accommodate more people in the same footprint. There is some clouds on the horizon in terms of what the economy or how the economy may perform. So we may see a bit more uncertainty starting to emerge in terms of the amount of space that organisations are looking to commit to.
JM:
I think it's a really good point, Tristan, and certainly one of my favourite phrases is sweating the asset. I think increasingly people now are being far more thoughtful about what they are asking people to do, to engage in how they're asking people to use space as opposed to just making assumptions about people sitting at their desk or otherwise.
Thanks, Tristan. I'm curious just to add to that, I'm wondering what are the changes you're seeing over the last year or two in terms of what your clients are particularly looking for? Has there been an evolution of that since the start of the pandemic?
TG:
Yeah, there has. You know, the discussions we're having with business leaders has been relatively consistent in that there's a real recognition on the importance that the office plays in the fabric of the organisation. So the discussions we're having around, how can we strategise to use the office as a tool that the organisation can use to implement any other initiatives that they are seeking to deploy? So things like, how can the office enhance culture or elevate the brand of the organisation or drive employee productivity and innovation will be a differentiation tool to attract and retain talent. So I think it's been quite a refreshing step change in the discussions we were having during the pandemic to the types of discussions we're having now.
JM:
That's really heartening to hear. So it's almost as though people have moved on from the kind of nuts and bolts aspects of the office or the kind of fear factory about hygiene and now they're really seeing the officer or the workplace is a key tool or lever for how they can be connecting with their staff.
TG:
Yeah, we often call it the silent partner. So how can you deploy the office as a silent partner to help achieve another initiative that's important to the firm?
JM:
Tom I'm going to turn to you now. The survey highlights that most occupiers are now building ESG, So environmental, social, governance considerations into their decision making processes. Can you please tell us more about that?
TB:
Yeah, sure. So clearly this is a global trend. There's been a lot of companies over the last, say, 24 months that have committed to net zero targets on the environmental side. So that obviously applies to the office space that they occupy as well. So the results from the survey showed that only 9% of respondents have no current plan to move into ESG friendly buildings in the future, so the rest are in varying degrees of this transition into ESG friendly buildings. I think probably the most important point from the results is that 24% of the occupiers said that they expect it to be the essential criteria when they're choosing an office in the future. So that was a pretty clear takeaway, and I think we're seeing investors respond to this as well, they're looking at buildings that they can potentially improve the environmental credentials of older buildings and because they know that that's what the tenants want, and that's where tenants are heading to.
JM:
Do I use the phrase the flight to quality. It's potentially overuse at the moment, but there's a reason why I think increasingly people want not just something that looks and feels good, but they want to know that they're building is a high calibre and performing well for the environment as well as for them. Tristan, did you have anything you wanted to add to that?
TG:
I think, really, just to echo what Tom said. I think the environmental impacts are top of mind when companies are making real estate decisions. But I also think it extends beyond the building selection and it goes to things like, how is the furniture going to be repurposed and reused if they do like to move or refit? I think tenants and organisations, it's becoming an expectation that the buildings that they choose to be in will align and support there ESG policies. So I think it’s becoming an expectation of most buildings.
JM:
Agreed.
Thanks so much for your time, Tom and Tristan. it's been great talking to you both, and I think we've potentially got a few topics for our future podcast.
Thank you people for listening to our podcast Talking Property with CBRE. I'm proud to work for a company that puts forward such great data and such great insight. So I look forward to potentially also connecting with you again on another podcast.
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Until next time.
