Who Fills The Gap?
With the office market structural shift continuing, and the take up of office space slowly decreasing, the office markets can no longer rely on the usual suspects to take up office space on an ever expanding basis. If they could, there would be more cranes in the sky.
This is a global thing, and it’s been going on for a while. We were discussing this very topic 2 years ago at a conference in Chicago filled with brilliant, experienced, hands-on CRE experts from many different markets. It was a “multi-house” view.
Of course, all markets are slightly different. The larger the market, the more it is impacted because it has the larger tenants who have a greater propensity to allow flexible working.
Smaller markets (smaller CBD’s, fringe or suburban) are not excluded. Smaller markets tend to have smaller tenants who proportionately have less flexible working but some of them house major corporates who have vacated the location completely.
Underpinning all of this is a simple reality: total demand for office space is now structurally lower than it was, and we cannot assume that growth will return in the same way it once did.
So, if we can no longer rely on the usual suspects, what sector can help a recovery?
Could it be the return of call centres?
We’ve all had our fair share of customer service experiences of late. If you ever get the chance, read Bernard Salt’s article from The Australian newspaper, “On Hold, No One Hears You Scream.”
Recently, some major US corporates are remembering the importance of human connection and are once again exploring how to improve customer service and bringing back call centres.
Of course, there’s one issue. Technology is so much better than it used to be which means the person on the other end of the phone, does not have to be in an office.
And if call centres aren’t the answer, the question becomes: where does that extra growth in demand come from? Perhaps it is flex space. Maybe the Australian capital city CBD’s follow London’s lead where flex space is now reportedly 10% of the total and increasing.
They may not fill entire buildings but combined with the other tenants, they create steady incremental demand that is becoming the new reality.
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