Fear of activity based working impact overstated: Jones Lang LaSalle report
Fears that demand for office space in Australia's capital cities could be crunched by the next generation workplace model - activity based working - are overstated, a new report has found.
Even the Sydney CBD office market, which is tipped to be the most exposed to activity based working (ABW), is showing only a gradual up take of this next generation trend, according to the report from Jones Lang LaSalle and the Property Council of Australia's NSW division.
The findings were revealed in their 20 page report - Activity Based Working: Impact on the Sydney CBD Office Market - which looked at the impact of the workplace concept on office markets. Essentially, ABW allows employees to work on projects in a shared environment rather than individual cubicles.
Their analysis found that AWB is gaining momentum with large corporate tenants and some highly compatible industries like finance and insurance. As such, a market like the Sydney CBD, which has a high concentration of finance and insurance tenants, was likely to be the most exposed market nationally to the trend, it said, while adding that the stock profile was another factor. Nearly 38% of the stock in the Sydney CBD is more than 5,000 square metres.
Significantly, the report also pointed out that the nature of lease expiry and natural tenant growth meant that the impact of ABW on market dynamics were "relatively gradual, even under higher take-up scenarios".
JLL director of research and author of the report, Leigh Warner, said ABW was typically taken up only at lease expiry. "Only around 15% of leases expire in any particular year, and the evidence to date suggests that firms have initially been relatively conservative in judging the space that they have taken upon moving to ABW", he said. "This means that the initial impact on market demand is minimal, and it will only be gradual over the term of new leases as firms accommodate natural growth within their fit out – rather than taking new space."
Under a mid-range take-up scenario, said PCA NSW executive director Glenn Byres the "Sydney CBD is estimated to see a reduction in net absorption over the next decade of just over 100,000 square metres, or 16% relative to a base case."
Those numbers, he said, also suggest AWB would have a limited influence on the future growth and supply requirements of Sydney's CBD office market.
"There is no question that ABW is a concept that is here to stay in one form or another, and that it will have an impact on the market," added Mr Warner. "However, the analysis undertaken clearly shows that impact is far from devastating on the market, even under high take-up assumptions."
The report concluded by saying that ABW was likely to be a trend that "will increasingly have an impact on office markets across Australia over the next decade", even though the portion of tenants that ultimately adopt ABW was still "very ambiguous".
"Regardless of the size of the eventual impact of ABW, the impact will be relatively slow over a period of 10 to 15 years," it said.