The future of the office has been hotly contested in the world of post-pandemic real estate. Will we, as acclaimed author and property expert Dror Poleg suggested at Urbanity 23 in September, be rid of offices as we know them or will we return in droves? JLL Australia and New Zealand chief executive officer Daniel Kernaghan is firmly in the latter camp.  Also speaking at The Urban Developer’s Urbanity 23 last month, Kernaghan said a return to the office is inevitable. “Culturally, companies are saying well, we want our people back together for our culture. We want our people back together because from a productivity perspective, we know they’re much more productive together, and that’s how we get innovation,” he says. “But there’s a real movement towards quality office space.”  ▲ The top 10 flexible workspace operators and landlord offerings make up 88 per cent of the flex market. The truth could be somewhere closer to the middle, according The Executive Centre general manager Australia Jacob Feenstra. Feenstra, who is also a board member with Flexible Workspace Australia,  says it will be a diverse landscape of working formats negotiated between the business and the employee and their respective needs. “On the coalface it is so broad and varied that depending on who you will speak to there’s a different answer, there’s not a consensus today and I doubt there ever will be,” the flexible workspace operator head says.  “Even if you speak to other workspace operators, we all have different client sets and nuances to our business and the clients we serve.” But trends in the world of work can be illuminating to the office sector and its future—one of the latest is the “workation”—the ultra-hybrid model of being able to plug your laptop in, attend meetings, make podcasts and more in an office space wherever you are in the country or even the world. New horizons for the flexible workplace Hybrid work increased considerably during the pandemic with some statistics suggesting that 34 per cent of Australian workers are now working this way. This increased flexibility also means that people are working not only from home or the office, but from the elusive “third space”. In the world of digital interconnectivity, that could be almost anywhere. Brussels-based flexible workspace provider IWG found that 88 per cent of hybrid workers “worked from anywhere” last year, while almost 57 per cent extended holidays by working from abroad.  Sydney, it found, scores highly for the phenomenon, with the availability of flexible office space tourism adding to its attraction. Feenstra says that The Executive Centre and Flexible Workspace Australia members have seen the impacts of the trend. “We’ve seen [the workation happen] and will continue to see it,” he says.  “We’ve had members from The Executive Centre network holidaying in Australia landing in Sydney or Melbourne and making use of our locations in those cities on their way in or out. “It was always the case—now it’s becoming more visible.” ▲ The Executive Centre general manager Jacob Feenstra. This is thanks to the increasing number of flexible workspaces and the willingness of companies to invest in them, he says, even after the huge impacts of Covid. “What has changed is work travel. It’s anecdotal but obviously work travel was a lot more common [before the pandemic],” Feenstra says. “Previously people travelling for work travelled business class—but the cost of business travel is so high so they are going economy or premium economy, and are travelling less for business. So when they do travel for business, they want to include a holiday.” And the rise of the workation means the fortunes of flexible workspaces could again be on the rise. The reputation of flexible working Flexible workspaces were initially tipped to benefit from the uncertainty of lockdowns, but the slower-than-expected return to the office led to a degree of consolidation within its market, according to a report from CBRE last month. However, flex operators are bouncing back, it says, accounting for 2.7 per cent of office stock (still down on its 3.1 per cent peak in June, 2020) and looking for ways to adapt to the new working landscape. The recovery of flexible workspaces has been divergent across Australian cities. While the Brisbane market has grown “significantly”, it has declined in Melbourne, where flexible work dropped to 2.2 per cent of stock in mid-2023, while Sydney is somewhere in between. ▲ During the past three years, according to CBRE, the average flexible workspace centre has grown 30 per cent to 2300 square metres. The idea of flexible working has taken a hit recently as the market watched the fortunes of WeWork—it is struggling to stay afloat after a collapse, with some media reports suggesting that its decline could put $900 million worth of rent payments in Australia at risk. “They expanded aggressively,” says Feenstra.  “When they were entering the market and growing, there was significant discounting and brokering ,which hurt the industry as a whole,  “The industry and office real estate as a whole is bigger than WeWork, but it will certainly leave a legacy. “But what it did do was bring [flexible working] to the notice of a market and a population that didn’t necessarily know about these offices and ways of working.” The fortunes of the flexible work space sector though are still bright. “It’s not radical change, but there is an evolution,” says Feenstra. “Changes are nuanced, but there are big changes in this space that organisations are committing to, because they had too much space before. “There have always been empty desks, and now with people in the office fr just three or four days this is even more noticeable.  “So we will have more flexible workspaces, smaller offices on shorter terms—and we’re seeing that and we’re listening.” ▲ Offshore operators such as IWG and The Executive Centre make up more than 50 per cent of the flex footprint in the east coast market, according to CBRE. It also means that flexible operators with standard offices are having to adapt quickly to the digitally driven demands of customers.  “One of the things that has changed for us is that as we’re evolving our work products,” says Feenstra.  “The pandemic put Zoom and Teams at the forefront and there is more of that than ever before. “In our new centers we’re building digital pods and meeting rooms for one to two people with built-in screens, all the audio equipment and connectivity you need.” A future of diverse needs JLL’s Dan Kernaghan agrees that there is no “one size fits all” for the office market now.  “It’s got to work for the organisation, its culture, and the type of work that it is doing,” he says. “I'm a five-days-in-the-office person, I“m very open about that. I love being in the office, I love being around my colleagues, my people. But at the end of the day, I understand that is different for differesnt people for different reasons. “But I“ll give you a stat—office rents in Sydney CBD during the past 12 months are up 6.8 per cent.  “That will continue as it’s been led by a number of factors but it’s clear that there’s much more movement and momentum that’s building in that space, and the positivity around office and everyone getting back together.” ▲ The Executive Centre began in Hong Kong almost three decades ago. The Executive Centre was founded 29 years ago in Hong Kong and it has collectively experienced plenty of change and adaptation in the sector. Feenstra expects even more. “We’re in so many different markets, but generally, we’re seeing positive uptake in flex workspace,” he says. “Some are performing better than others, and Australia is doing really well but we have higher costs—as the cost of living is high so the cost of working is high.  “If we look at the office and the way that we work, even in 20 years I’m not sure we can imagine what it looks like.  “The office won’t go away—as humans we’re wired for connection in person. We can achieve a lot in a virtual world but there is still a need for most of us in a business setting to meet. “Overall it’s a really positive sentiment and an indicator of what’s still possible for the times ahead.” You are currently experiencing  The Urban Developer  Plus (TUD+), our premium membership for property professionals.  Click here to learn more.
