Will the home office takeover?

Despite widespread technology allowing us to work remotely, we continue to congregate in traditional offices. Could the home office takeover?

12 Apr 2017

We've had activity based working (ABW) and work from home concepts in place for many years now, yet there's still millions of people that commute to our CBDs each day. Around 85% of the office space in the Melbourne metropolitan area is located in the CBD and Southbank, with St Kilda's importance decreasing due to residential conversion. Sydney's metro office space is more spread out, with ~70% of space in the CBD and ~10% in each of North Sydney, Macquarie Park and Parramatta. Brisbane has ~65% in the CBD versus the fringe.1 What's surprising is that the Sunshine Coast is one of the fastest growing areas in Australia, but has <5% of the office space offered in the Brisbane metro area. This indicates that Australia remains a centralised white collar workforce.

There have been numerous studies to assess why we continue to congregate, despite working from home being a viable alternative. Deloitte's research found that when employees collaborate, they work 15% faster on average and are 60% more innovative. Businesses with a collaborative strategy are twice as likely to outgrow their competitors.2 Furthermore, corporate culture and goals are better identified in a collaborative environment. Coming together in an office environment helps satisfies the human need for social interaction and provides networking opportunities. The growth of WeWork is a testament to this collaborative culture. The US start-up has rented more space in the centre of London since 2012 than any other company, leasing 2.6m ft2 of space, according to estate agency group Cushman and Wakefield.

The key for office owners is to create an environment where firms can attract the best talent to collaborate. The best "collaborative factories" will be those offering flexibility, vibrancy and wellness. This could take the shape of onsite childcare and gyms (with priority given to tenants), or shorter leases to cater for start-up firms. Most office developments already include ground floor retail and designated places that support cyclists, joggers and walkers (known as end-of-trip facilities). There's no longer an excuse to work back in the office when we can access information anywhere, plus with biometrics taking over, remote workers will be able to ditch the security swipe card. Buildings will ultimately be alerted to our impending arrival and activate the relevant devices and systems. The future should be a mixture of office accommodation solutions; from home offices, convenient suburban locations and CBDs.

The bigger question is what type of employees we will become, with 35% of the US workforce being freelance. The growth in freelance and outsourced work is projected to reach 50% in the next few years.3 Repetitive jobs will be replaced by software, greater outsourcing will occur and big firms will push for creative, relationship, "ideas" people.

Driverless cars will impact property usage as they effectively become an extension of the office. Given the use of traffic flow algorithms that can tell you the optimum time to travel to and from work, and without the need for traffic lights, employees will be able to enter a driverless vehicle and start working with no wasted time on travel and commuting. People in regional locations can use their commute time productively and live where they want rather than feel pressured to move to the city to be closer to the office. This could then support more satellite cities (decentralisation), with the advancement of smaller capitals and regional cities such as the Sunshine Coast. The home office concept is also gathering pace with Mirvac offering three level town houses, with the family home concentrated on the upper levels and the ground floor offering a formal work environment.

Conserving energy will be a must for new developments, but creating "off grid" buildings appears to be a challenge. Most office roofs are not large enough to house the required number of solar panels to power the entire building, so other, smarter energy conservation methods will need to be utilised. New developments are already using water recycling systems that treat wastewater for toilet flushing, garden irrigation and cooling towers. There's also a trend towards building in wood, for example, Lend Lease are developing Australia's tallest timber office tower in Brisbane. Timber offers a better sustainability rating, faster construction time (panels arrive and join like Lego blocks), and less noise and waste during construction. Lend Lease have already successfully completed one project in Sydney using cross laminated timber (CLT) and glue laminated (glulam) timber.

This is article is an excerpt from The Future of Real Estate Whitepaper.

1 PCA. Office Market Report. January 2018
2 Dexus Research. What will the role of office buildings be in the future? September 2017
3 UpWork and Freelancers Union. Freelancing in America. 2017

Pat Barrett

Investment analyst

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