2024 Office Markets: Technology

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2024 Office Markets: Technology

Happy new year and hope you had a wonderful break from work. 2024 will be a fascinating year in the Australian office markets and CREview believes technology will be the #1 disrupter.

From 2020 to late 2022, the main technological breakthrough was not technology itself but the adoption of it. It was the great realisation that people can work from anywhere.

Off the back of that, in mid-2022 we predicted an average annual 2% (100,000 m2) negative impact to the Sydney CBD office market between 2022 and 2027 due to increased adoption of technology to improve efficiency and productivity. This includes WFH, remote, hybrid etc as they are all productivity enhancers that have come out of this structural change.

Then in November 2022, Chat GPT was launched. AI became mainstream and predictions of its impact on work and office space vary greatly and will be specific to each person, company, sector and economy. The latest IMF Discussion paper, Gen-AI: Artificial Intelligence and the Future of work, was released days ago. It’s a great discussion paper.

The report highlights that it is not just administrative and process roles that will be highly impacted, but AI will also impact high paying executive roles.

CEO Australian Industry Group, Innes Willox wrote Monday in the AFR, “(The) focus on productivity-enhancing measures ranks far ahead of expected funding of capital expenditure and research and development. One key take out is that, given labour and skills shortages shortages, businesses expect to significantly increase their investments in technology to drive productivity improvements.” The great realisation continues.

2023 did not see the predicted 2% technology-induced reduction in leased office space and that is because the majority of new leases were still based on pre-2023 thinking. However, there was a noticeable change in CRE tenant thinking in 2023. From now on we will start to see the effects of this structural change.

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