Property Depreciation Schedules - The New reality

The future of office buildings…

Is the office as we know it dead?

MUCH has been said about the future of workplaces since COVID-19 forced some major changes to office life as we know it,  kicking flexible work practices into gear.

At this stage, no one really knows how offices will look in the future as uncertainty still abounds, but we do know that workplaces will undergo (potentially lasting) change.

Health and safety will be a huge factor, with social distancing requirements and even temperature testing being introduced in some buildings, but flexible working arrangements will also determine how future offices will look.

I look into my crystal ball at the end of this blog

COVID-19 Handshake

How will workplaces change?

COVID-19 has necessitated the most transformational shift for work in perhaps a century, says McCrindle Communications Director Ashley Fell, who just released a new book about this topic in conjunction with Mark McCrindle called Work Wellbeing: Leading thriving teams in rapidly changing times.

“The most notable was when almost overnight the office-bound workforce globally relocated to their homes,” she says.

“The digital transformation of our organisations was achieved not through management strategy or a new technology solution, by the realities of this virus.

“For the first time in modern history working from home became the norm and even ushered in the three-letter acronym to describe it: WFH. And it is here to stay.”

In the future it is likely we will see our office spaces change to accommodate more flexible working styles and less people in them all the time, says Fell, with most workers in this knowledge economy having more of a regular opportunity to work a day or two from home.

“Our national survey amid the COVID-19 crisis showed that 69% said they were as, if not more, productive when working from home than they were at their office.

“It also showed that far from being a temporary response to a global pandemic, 78% said that working from home will become the new normal.”

Workplaces will also change to become COVID-safe, enabling social distancing and safety and health measures.

Property Council Chief Executive Ken Morrison says the Property Council has worked closely with Safe Work Australia on guidelines for office buildings, including how to manage lifts, common areas of buildings and change room facilities for cyclists and people running or walking to work.

“There is now comprehensive advice available to help building managers and businesses to make their workplaces COVID-safe. Our members have been proactively addressing these issues to provide a COVID-safe environment for their tenants and their workers.

“As people are able to return to their offices, we believe they will do so in increasing numbers depending on their local public health restrictions.”

Offices are here to stay

With more people working from home it is likely we will see less demand for full utilisation of office spaces that has been the norm over the last few decades, says Fell. But that doesn’t mean offices will be gone entirely.

“The office will still be important in the future, but likely for collaboration, creativity and social interaction – the parts of work that are harder to achieve when workers work remotely.”

While there are some who say COVID-19 is the death of the CBD or the office building, says Morrison, and we may see some tenants provide more of their people with flexible working arrangements, at the same time they may also need more space in their offices to accommodate physical distancing.

“There may be some changes to the way we configure our offices, but they will still be a very important part of our working lives.”

While Australians have shown great versatility in making the shift to working from home, many are keen to get back to their workplace and reconnect with their work colleagues in person, adds Morrison.

According to an ABS survey recently, 86% of working Australians were somewhat comfortable in resuming attendance at their usual workplace, he says.

“There are lots of positive benefits to working in an office including the opportunities they present for critical ingredients for business success, including collaboration, creativity, innovation, learning, mentoring and developing and sustaining team culture.

“Many businesses have been able to manage remote working so well because of the close internal and external networks that their people developed in the pre-pandemic. Businesses have been surfing off the previous benefits of working in offices.

“It’s also a practical issue – not everyone can do their jobs as safely or efficiently from home, so we need to make sure that our CBDs and offices are open and working again to support those businesses which need a physical premises for their staff.”

LJ Hooker Commercial Managing Director Mathew Tiller says while there will be some businesses that see COVID-19 workplaces changes as a way to reduce costs and move some work online, many businesses will be unable to reduce their office space as they will need to ensure social distancing requirements are maintained.

He says those in the former category are also unlikely to do away with the office entirely.

“They will still need a central point to meet; a place where employees can catch up and engage with others.

“Working from home is great in terms of not having to commute to the office, but human interaction is also still very important for culture of work and mental health of employees. It also cultivates ideas and strategy.

“There will always be a need for office space; it will just be used differently and for different purposes.”

Tiller says the location of offices may also change, with many businesses likely to consider moving from the CBD to a suburban office closer to where employees live.

What do I see when I look into my crystal ball?

From an Investor Viewpoint:

In my view office buildings will become more spread out over time. We may find more suburban co-work spaces in the future. People will still want to physically interact, albeit less often.

I can see some CBD Offices being converted to residential over time.

I can’t see too many new office buildings being given the green light in the future.

Smaller office spaces may become more in demand as companies downsize to reflect the new working from home reality.

If you don’t own an office and are thinking of having a small hub where workers can get together and share space, now might be a good time to start looking.

From a Tenant Perspective:

If you are a tenant with a lease that’s about to expire, now could be a good time to negotiate.

You may have a clause that allows you to “re-set” the rent based upon an independent market valuation, rather than an automatic increase or linked to CPI.

I expect to see a lot of sub-leasing space coming onto the market over time.

As a rule of thumb, businesses require roughly between 8 and 12 square metres of gross space per employee. With more employees working from home, companies could in effect get two employees in that space on a co-sharing basis, thus reducing the need for office space in the future.

Whether you’re an investor of office space, or a tenant, you can get a depreciation schedule quote with our quantity surveyors

About Tyron Hyde

Tyron Hyde is a director of quantity surveying firm Washington Brown. He is regarded as one of the industry's leading experts in property tax depreciation, is regularly quoted in the media & asked to speak at conferences. -